Top 10 Hot Events of A-Share Opening in 2012

2012 was a majorly eventful year for the Chinese A-Share market. This past year saw the highest highs, lowest lows and some major newsworthy events. Here are the top ten events of 2012:

1. Elimination of the B-Share Price Premium: For years, the “A-Share” price premium over the “B-Share”, a difference that existed due to foreign ownership restrictions, has created a large arbitrage opportunity for dealers. After long awaited notice from the China Securities Regulatory Commission (CSRC) in April, China removed the B-Share Price Premium and unified the market, expanding foreign investment access and boosting stock prices for the move.

2. Launch of China’s New Indexes: The China Securities Regulatory Commission introduced three new stock indexes in the Shanghai stock market. The Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index are now larger and more comprehensive gauges of the domestic stock market than the Shanghai Composite Index and Shenzhen Components Index as they include both A- and B-Shares. In addition, the SSE180 Index, also known as the China Enterprise Index, has been launched to reflect the performance of the 180 largest A-Shares in the Shanghai market.

3. Hiked Margin Requirements: In August, the China Securities Regulatory Commission imposed additional margin requirements on select stocks of “southbound trade” investors, those with accounts in Hong Kong, in order to cool the fast-rising domestic market. This announcement sent the Shanghai Composite Index down almost 6 percent in a single day and stocks with higher margin requirements, such as airlines and brokers, experienced steeper losses.

4. IPO Freeze: In October, the CSRC suspended initial public offerings (IPO’s) in order to address issues with corporate accounting. By taking this step, Chinese securities officials hoped to curb speculation and investor manipulation within the market.

5. Foreign Investment Allowed in QFII Scheme: For the first time ever, in October China allowed foreign investors to directly invest in their domestic securities, rather than the quota based Qualified Foreign Institutional Investor (QFII) Scheme. This news attracted many investors seeking high returns, especially those from Hong Kong.

6. Launch of RQFII Program: The RQFII program, a form of the QFII program, opened up mutual funds, securities firms and asset managers domiciled in Hong Kong and Taiwan to invest in the A-Share Market. The RQFII program is expected to bring an influx of foreign capital into the Chinese market due to its diversified and cost-effective nature.

7. MSCI Decision: The Morgan Stanley Capital International (MSCI) made the controversial announcement that China A-Shares were excluded from its indices, a decision which was seen as an indication that foreign investors are not yet ready for direct ownership and it will backtrack for the time being.

8. Launch of New Board Name: In June, the China Securities Regulatory Commission announced a renaming of the Small and Medium Enterprise (SME) Boards to the Growth Enterprises Market (GEM). This renaming, which shifted the focus from size to growth perspectives, was modified to “GEM” in order to better reflect the Chinese version of the “NASDAQ”.

9. SSE50 Index: The Shanghai Stock Exchange (SSE) launched the SSE50 Index in March in an attempt to create a representation of the performance of 50 of the biggest companies in the Shanghai-listed stocks. The newly created index serves as a measure of the market sentiment in China A-Shares and was an important milestone in the development of the A-Share market.

10. China Enterprise Index (CEI): In July the CSRC launched a new index, the China Enterprise Index, designed to study the China A-Shares. The CEI is comprised of the 180 largest and most influential companies listed in the Shanghai and Shenzhen Stock Exchanges and is a major source of stock market information and statistics.

2012 was definitely a roller coaster year for the Chinese A-Share market. This past year saw the introduction of new stock indexes, foreign investment allowances and expanded market access, but also increased margin requirements, IPO freezes and index exclusions. Whatever the outcome, A-Shares have definitely grown to become one of the most factors of the Chinese economy on a global basis.

2012 has been a very interesting year in China’s stock market. There have been several highly publicised events that have had a great influence on the market. Here are the ten most significant and noteworthy events of 2012:

1. Launch of the 12-dimensional index: This index was launched in March 2012 and is integrated stock market index that measure the performance of twelve sectors in the A-Share market. Investors can use this index to track trends in the stock market and make better investment decisions.

2. Launch of mobile trading: Mobile trading was formally launched in May 2012, giving stock market traders the ability to make transactions on their smartphones. This has made trading more convenient and accessible to a broader range of investors.

3. Foreign capital influx: Several foreign investors have entered the Chinese stock market in recent months, including major players such as Goldman Sachs. This influx of capital has helped to strengthen the stock market and has encouraged further growth.

4. Introduction of Quantitative analysis: Quantitative analysis was introduced in June 2012 to help investors carry out complex analysis of stock data. This use of computer-based analysis has been highly successful and has revolutionised the way in which analysts view the market.

5. Creation of the Shanghai-Hong Kong Stock Connect program: This program was launched in August 2012 and establishes trading linkages between the Hong Kong and Shanghai stock exchanges. It has enabled investors in both markets to directly invest in each other’s market and has increased the liquidity of both markets.

6. Xiao Qianguo’s statements: Xiao Qianguo, the chairman of the China Securities Regulatory Commission made some very positive statements about the stock market in September 2012. He discussed the possibilities of the market and encouraged investors to remain confident in their investments.

7. Introduction of margin trading: Margin trading was launched in October 2012 and has become very popular with investors. This form of trading allows investors to borrow money from brokers to buy more stock, which has led to an increase in the amount of risk being taken.

8. Issuance of new financial products: New financial products such as stock index futures, ETFs and ABSs have been introduced to the market at an increasing rate. These products allow investors to better diversify their portfolios and hedge their risks.

9. Increase in open interest: Open interest in the stock market has been steadily increasing since October 2012. This increased activity suggests that more investors are willing to invest long-term in stocks, and indicates that confidence in the market is growing.

10. Launch of ChiNext: China’s over-the-counter stock market, ChiNext, was launched in November 2012. This allows smaller companies to list their shares on the stock exchange and to attract more investors who are looking for higher returns.