Topics Covered China's Financial Markets Stock markets in China before 949 Stock markets in China since 980 Reform of the Split-share Structure Lecture 5 China's Stock Markets Stock Market in China Before 949 5.I Stock markets in China started in Shanghai since 1860s among western Before 949 nance with stock, stock transactions became hanghai Security Brokers' Consortia established in 891 ased in 9 4 First stock exchange established in Beijing in 8 Stock Market in China Before Stock Market in China Before l949 l949 Second boom came up in the 1930s and established in July Ist1920: Shanghai HuaShang but high inflation during the war led to th Stock Exchange was established in 1921 GuoMin Dang Government considered Tianjin Security and Goods Exchange was reestablishing the stock exchanges after 1945. established in 921 and Shanghai Stock Exchange Limited was Till beginning of 1921 established in 946 200 stock exchanges in China, of which more ge reestablished in 1948 than 150 were in Shanghai but soon failed in high inflation. Over speculation collapsed in the end of 192I only 6 stock exchanges survived
1 China’s Financial Markets By Zhang Xiaorong Lecture 5: China’s Stock Markets 5-1 Topics Covered — Stock Markets in China Before 1949 — Stock Markets in China since 1980 — Reform of the Split-share Structure 5-2 5.1 Stock Markets in China Before 1949 5-3 5-4 Stock Market in China Before 1949 — Earliest transactions of international stocks started in Shanghai since 1860s among western merchants. — Since 1880s, private-owned firms began to finance with stock,stock transactions became popular. — Shanghai Security Brokers’ Consortia established in1891. — Security Trade Law released in 1914. — First stock exchange established in Beijing in 1918. 5-5 Stock Market in China Before 1949 — Shanghai Security and Goods Exchange was established in July 1st 1920; Shanghai HuaShang Stock Exchange was established in 1921. — Tianjin Security and Goods Exchange was established in 1921. — Till beginning of 1921, there were more than 200 stock exchanges in China, of which more than 150 were in Shanghai. — Over speculation collapsed in the end of 1921, only 6 stock exchanges survived. 5-6 Stock Market in China Before 1949 — Second boom came up in the 1930s and 1940s, but high inflation during the war led to the bust — GuoMinDang Government considered reestablishing the stock exchanges after 1945, and Shanghai Stock Exchange Limited was established in 1946. — Tianjin Security Exchange reestablished in 1948, but soon failed in high inflation
Stock Market in China Before Stock Market in China Before l949 1949 1891 and exchange The second stock exchange was established in Both exchanges stopped the transaction in Ch tw wege merged into HK Stock Exchange Most of the transactions were manipulated by ple shares in 1872-1910(Qing Era) the banks in Shanghai. Stock Market in China Before 1949 5.2 Stock Markets in China Since 980 Sample shares in the Chinese Republic( 1911-1949) Stock Market from 950 to 980 Shanghai Stock Exchange was closed in June 5.2 Stock Markets in China 1949 Since 980 Tianjin Stock Exchange was reestablished in Beijing Stock Exchange was established in Feb. 950 Transactions in both exchanges became thinner
2 5-7 Stock Market in China Before 1949 — HK Stock Trading Association was established in 1891, and changed the name to HK stock exchange in 1914. — The second stock exchange was established in 1921. — Both exchanges stopped the transaction in 1941. — The two were merged into HK Stock Exchange Co. Ltd. in 1947. — Market size was small compared with Shanghai. — Most of the transactions were manipulated by the banks in Shanghai. Sample shares in 1872-1910 (Qing Era) Stock Market in China Before 1949 5-8 5-9 Stock Market in China Before 1949 Sample shares in the Chinese Republic (1911-1949) 5.2 Stock Markets in China Since1980 5-10 5.2 Stock Markets in China Since1980 5-11 5-12 Stock Market from 1950 to 1980 — Shanghai Stock Exchange was closed in June 1949. — Tianjin Stock Exchange was reestablished in June 1949, which became the first stock exchange in PRC. — Beijing Stock Exchange was established in Feb.1950. — Transactions in both exchanges became thinner with the stabilization of finance and commodity prices
Stock Market from 950 to 980 Stock Markets in China since 980 In 1952, Tianjin Stock Exchange was merged to Early Stage Tianjin Investment company. 980-1990, experimental period Beijing Stock Exchange was closed From 1950s to 1970s, only the gove could issue bonds, which paid interest but were not tradable Stock market"disappeared" in Chin Third Stage 1999-2008, development under regulation Fourth Stage 2009-present, more rational market after the Early Stage: 1980-1990 Early Stage: 1980-1990 Earliest Stocks Issued issue stocks in early 1980s Shanghai raised equity capital of 5 issued at the face value with ssued stocks with Shenzhen secur Byl990, there otally 8 stocks traded in No underwriter involved: limited secondary market Example: On July 25th 1984, Beijing Tianqi hmag89m助R hares at raised capital of 3 million RMB. In Dec. 1984. Feile Acoustics in Shanghai m issued 10,000 shares at RMB 50 to the public. Early Stage: 1980-1990 Early Stage: 1980-1990 86. stocks of Feile Acoustics and Shenzhen Security Company was established based ns in September 1987 with the from PB Byl990, there were 5 stocks traded in Shenzhen with rading(September 26th, 1984)for Feile and Yanzhong in ICBC ing
3 5-13 Stock Market from 1950 to 1980 — In 1952, Tianjin Stock Exchange was merged to Tianjin Investment company. — Beijing Stock Exchange was closed. — From 1950s to 1970s, only the government could issue bonds, which paid interest but were not tradable. — Stock market “disappeared” in China. 5-14 Stock Markets in China since1980 — Early Stage ◦ 1980~1990, experimental period — Second Stage ◦ 1991~1998, rapid development without regulation — Third Stage ◦ 1999~2008, development under regulation — Fourth Stage ◦ 2009-present, more rational market after the global financial crisis Early Stage: 1980~1990 — Earliest Stocks Issued ◦ Some small-size SOEs and collective firms began to issue stocks in early 1980s ◦ The shares were issued at the face value with promised dividends and maturity to the employees and local residents ◦ No underwriter involved; limited secondary market ◦ Example:On July 25th 1984,BeijingTianqiao Company first publicly issued shares at RMB 100 and raised capital of 3 million RMB. ◦ Example: In Dec. 1984, FeileAcoustics in Shanghai issued 10,000 shares at RMB 50 to the public. 5-15 5-16 Early Stage: 1980~1990 — Earliest Stocks Issued ◦ In January 1985, Yanzhong Industrial Company in Shanghai raised equity capital of 5 millionYuan. ◦ OnApril 11th 1988, Shenzhen Bank of Development issued stocks with Shenzhen Security Company ◦ By1990,there were totally 8 stocks traded in Shanghai Equity Financing 1980-1990 in China (in Bln RMB) 1980-1987 1988 1989 1990 Total 1 2.5 0.66 0.43 4.59 5-17 Early Stage: 1980~1990 — Stock Trading and Security Companies ◦ From Sept.26th 1986,stocks of FeileAcoustics and Yanzhong became traded (OTC) in ICBC Jingan Security Department. ◦ Shenzhen Security Company was established based on 12 financial institutions in September1987 with the approval from PBC ◦ In 1988,three security firms were established in Shanghai. ◦ By1990,there were 5 stocks traded in Shenzhen with 12 security companies. ◦ The OTC market for stock trading had been established. . 5-18 Early Stage: 1980~1990 The first day ofTrading (September 26th,1984) for Feile andYanzhong in ICBC Jingan Security Department
Early Stage: 1980-1990 Early Stage: 1980-1990 上Dmx Ding gave Mr John Phelan, president of stock as a gift Second Stage: 1991-1998 Second Stage: 991-1998 Shanghai Stock Exchange(SSE) was established Dec. 9 SATQ System of Automated Trading and uoting) was adopted in Dec 1990 omputerized trading system, automatic matching of buyers and sellers according to In Oct. 992, CSRC was established In April 1993, Tentative Rules on Security Issuing and Transaction"was released Second stage: 1991-1998 Second stage: 1991-1998 No of a shares listed set up in 1992, traded in US dollars on sse and in hk dollars on szse. Individuals and legal persons in the PRC were only allowed to buy and sell a shares, while foreigners and residents of Hong Kong, macau, and Taiwan, could only buy and sell B shares. From February 19th 2001, B shares market became open to PRC residents. No new b shares issued since 2003 as more firms went listed in overseas stock markets a55E5
4 5-19 Early Stage: 1980~1990 Sample shares in PRC in 1980s 5-20 Early Stage: 1980~1990 On Nov.14th, 1986,Mr. Deng Xiaoping gave Mr. John Phelan, president of NYSE, a share of Feile Acoustics stock as a gift. 5-21 Second Stage: 1991~1998 — Shanghai Stock Exchange (SSE) was established on Nov 26th 1990, and started to operate on Dec. 19th . — SATQ (System of Automated Trading and Quoting) was adopted in Dec 1990 —— Computerized trading system, automatic matching of buyers and sellers according to price and time — In Oct.1992, CSRC was established. — In April 1993, “Tentative Rules on Security Issuing and Transaction” was released. 5-22 Second Stage: 1991~1998 5-23 Second Stage: 1991~1998 — B shares market ◦ B shares was set up in 1992, traded in US dollars on SSE and in HK dollars on SZSE. ◦ Individuals and legal persons in the PRC were only allowed to buy and sell A shares, while foreigners and residents of Hong Kong, Macau, and Taiwan, could only buy and sell B shares. ◦ From February 19th 2001, B shares market became open to PRC residents. ◦ No new B shares issued since 2003 as more firms went listed in overseas stock markets. Second Stage: 1991~1998 — No. of A shares listed 5-24
Second Stage: 1991-1998 Second Stage: 1991-1998 No of listed b shares Market Development 1993-1998(in Billion Yuan) 9.98 38 11oe 3690e 948d 8127e 79 M4s2?52A■3n234 mn■ 25e 4.6d 19s2Ig 57454 25 Second Stage: 1991-1998 Second Stage: 991-1998 Market size till the end of 998 and Limit-down in sse Number of listed companies: 851 Total lssuing: 234.5 Billion Yuan Total market capitalization RMB 1952 Billion bec. 19- Dec 26.1990 (24% of GDP) Market capitalization of tradable shares: 574.5 Billion Yuan 6eb.7.l99 Aggregated capital raised: 778 Billion Yuan 上上 Dec 16. 1996-present 'Difierent limit-ups and-downs to todo. Second stage: 1991-1998 Third Stage: 1999-2008 Limit-up and Limit-down in SZSE July Ist, 1999: Security Law effective March 16 h, 2000: A Tutor Period of I year June 26- Now 1B, 1990 b14|90M|9 16 h. 2001: From March 2003. one. 7.199|Dec.l5.|99 nies should be independent directors. Ih, 2001: stamp tax reduced to 0.2% 5
5 Second Stage: 1991~1998 — No. of listed B shares 5-25 0 9 21 33 35 41 43 51 1 9 19 24 34 43 51 54 0 10 20 30 40 50 60 1991 1992 1993 1994 1995 1996 1997 1998 SSE SZSE Second Stage: 1991~1998 Financing With A shares Financing with B shares No. Of Investors (million) Total Market Cap. Market Cap. Of Tradable Shares Market Turnover Market Cap. as % of GDP 1993 27.64 3.81 8.35 354.15 86.16 362.72 10.20% 1994 9.98 3.83 11.08 369.06 96.89 812.76 7.98% 1995 8.55 3.34 12.94 347.43 93.82 403.65 5.94% 1996 29.43 4.72 24.22 984.24 286.70 2133.20 14.50% 1997 82.59 10.79 34.80 1752.90 520.44 3072.18 23.44% 1998 77.80 2.56 42.60 1952.18 574.54 2352.73 23.13% 5-26 Market Development 1993-1998 (in BillionYuan) 5-27 Second Stage: 1991~1998 — Market size till the end of 1998 ◦ Number of listed companies: 851 ◦ Total Issuing: 234.5 BillionYuan ◦ Total market capitalization : RMB 1952 Billion (24% of GDP) ◦ Market capitalization of tradable shares: 574.5 BillionYuan ◦ Aggregated capital raised: 778 BillionYuan Second Stage: 1991~1998 — Limit-up and Limit-down in SSE *Different limit-ups and –downs to stocks. 5-28 Duration Limit-up Limit-down Nov.26-Dec.18, 1990 3% 3% Dec.19-Dec 26, 1990 5% 5% Dec.27-Dec.30, 1990 1% 1% Dec.31,1990-Apr.25, 1991 0.50% 0.50% Apr.26-Feb.17,1992 1% 1% Feb. 18-May 20, 1992 1%-5%* 1%-5%* May 21, 1992-Dec 15,1996 None None Dec.16, 1996-present 10% 10% 5-29 Second Stage: 1991~1998 — Limit-up and Limit-down in SZSE Duration Limit-up Limit-down May 29-June 17, 1990 10% 10% June 18-June 25, 1990 5% 5% June 26-Nov. 18, 1990 1% 5% Nov.19-Dec.13, 1990 0.50% 5% Dec.14,1990-Jan.1,1991 0.50% 1% Jan.2, 1991-Aug.16,1991 0.50% 0.50% Aug.17,1991-Dec. 15, 1996 None None Dec.16, 1996-present 10% 10% 5-30 Third Stage: 1999~2008 — Regulations ◦ July 1st, 1999: “Security Laws” became effective ◦ March 16th , 2000:ATutor Period of 1 year required for companied that are going to get listed ◦ August 16th , 2001: From March 2003, onethird of the board members in listed companies should be independent directors. ◦ Nov 11th , 2001: stamp tax reduced to 0.2%
Third stage: 1999-2008 Third Stage: 1999-2008 January 7 th, 2002: "Guidelines for Corporat tradable and non-tradable shares (split share Nov, 2002: QFIl introduced structure)announced by CSrC ° August2004:“ Security Laws" revised May 30th, 2007: stamp tax increased to 0.3% SME board launched April 24 h, 2008: stamp tax cut to O1% January It, 2005: Approval Approach(enacted Aug 2008: CSRC required that only listed in 2001)replaced by Recommendation companies that distribute cash dividend no ss than 30% of the net income in the recent Jan 24, 2005: stamp tax reduced to o1% years are qualified for refinancing Third stage: 999-2008 Third Stage: 1999-2008 Traded Securities No of a shares listed ° A shares o Convertibles Closed-end funds Open-end Funds ETF(Exchange Traded Fund) SE SZSE-main board SME Board Third stage: 1999-2008 Third Stage: 1999-2008 Total Market Capitalization(in Billion of RMB) Market Capitalization of Tradable Shares(in Billion of RMB Ihh 1191119x0m加c0204
6 5-31 Third Stage: 1999~2008 — Regulations ◦ January 7th , 2002: “Guidelines for Corporate Governance in Listed Companies” ◦ Nov, 2002: QFII introduced ◦ August 2004: “Security Laws” revised ◦ SME board launched ◦ January 1st , 2005:Approval Approach (enacted in 2001) replaced by Recommendation Approach ◦ Jan.24th , 2005: stamp tax reduced to 0.1% 5-32 Third Stage: 1999~2008 — Regulations ◦ April 29th, 2005:Attempts in integrating tradable and non-tradable shares (split share structure) announced by CSRC ◦ May 30th , 2007: stamp tax increased to 0.3% ◦ April 24th , 2008:stamp tax cut to 0.1% ◦ Aug. 2008: CSRC required that only listed companies that distribute cash dividend no less than 30% of the net income in the recent 3 years are qualified for refinancing 5-33 Third Stage: 1999~2008 — Traded Securities ◦ A shares ◦ B shares ◦ Corporate Bonds ◦ Treasury Bonds ◦ Convertibles ◦ Closed-end Funds ◦ Open-end Funds ◦ ETF (Exchange Traded Fund) ◦ Warrants Third Stage: 1999~2008 — No. of A shares listed 5-34 472 560 639 705 773 827 823 832 850 854 450 499 494 494 491 484 481 464 455 454 38 50 102 202 273 0 100 200 300 400 500 600 700 800 900 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 SSE SZSE-main board SME Board 5-35 Third Stage: 1999~2008 Total Market Capitalization (in Billion of RMB) 0 5,000 10,000 15,000 20,000 25,000 30,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 SSE SZSE 5-36 Third Stage: 1999~2008 Market Capitalization ofTradable Shares (in Billion of RMB)
Third Stage: 1999- 2008 Third Stage: 1999-2008 Number of Investors(in Million) 0m Upon the approval of CSrC, Shenzhen Stock Exchange launched the SME Board in May Direct financing channel for the growing SMEs Independent in operation, regulation, codes and index 12》200)33012x02201 A preparation for Growth-Enterprises board a shangna a shenzhan Third stage: 999-2008 Third Stage: 1999-2008 Financial requirement on listing in SME Positive net profit curve years and totals over 30 million RMB Cash flows from consecutive total over 50 million RMB. or Total equity before IPO is no lower than 30 million rMb Intangible assets account for no more than Closed-End .0% of net asset (excluding licensing of land, fishing and mining) Third Stage: 1999-2008 Third Stage: 1999-2008 Trading Instruments in SZSE Corporate bonds Issued by corporations or LLCs Based on the financing needs of corporations Should Don't need approval of the government losed-End Debenture Issued by large state-owned companies(usually for Should be approved by the National Development
7 5-37 Third Stage: 1999~2008 Number of Investors (in Million) 5-38 Third Stage: 1999~2008 — SME Board ◦ Upon the approval of CSRC, Shenzhen Stock Exchange launched the SME Board in May 2004. ◦ Direct financing channel for the growing SMEs with well-defined core business and hi-tech contents ◦ Independent in operation, regulation, codes and index ◦ A preparation for Growth-Enterprises board 5-39 Third Stage: 1999~2008 — Financial requirement on listing in SME ◦ Positive net profit in recent 3 consecutive years and totals over 30 million RMB ◦ Cash flows from operating in recent 3 consecutive total over 50 million RMB, or sales from operating in recent 3 consecutive total over 300 million RMB ◦ Total equity before IPO is no lower than 30 million RMB ◦ Intangible assets account for no more than 20% of net asset（excluding licensing of land, fishing and mining) Third Stage: 1999~2008 — Trading Instruments in SSE 5-40 2001 2002 2003 2004 2005 2006 2007 2008 Corporate Bonds 11 17 19 27 50 66 71 100 Cash 17 19 24 47 63 68 Repurchases 3 3 3 3 Debenture 2 Convertibles 1 3 13 19 18 19 12 12 Treasury Bonds 27 28 30 44 52 113 113 77 Cash 19 17 21 29 43 54 62 Repurchases 8 11 9 15 9 57 51 Funds 23 25 25 25 26 26 17 13 Closed-End 23 25 25 25 25 24 14 13 ETFs 1 2 3 3 Warrants 4 18 6 14 Third Stage: 1999~2008 — Trading Instruments in SZSE 5-41 2001 2002 2003 2004 2005 2006 2007 2008 Corporate Bonds 1 4 9 13 16 24 26 41 Convertibles 3 6 10 13 11 7 5 5 Treasury Bonds 19 21 35 39 53 62 70 85 Cash 19 17 21 29 43 54 62 Repurchases 8 11 9 15 9 57 51 Funds 25 29 29 30 39 46 48 48 Closed-End 25 29 29 29 29 29 21 18 Open-End 1 10 15 25 28 ETFs 2 2 2 Warrants 3 8 7 14 Third Stage: 1999~2008 — Corporate bonds ◦ Issued by corporations or LLCs ◦ Based on the financing needs of corporations ◦ Should be approved by CSRC ◦ Don’t need approval of the government ◦ Credit rating is usually required — Debenture ◦ Issued by large state-owned companies (usually for the financing of big projects) ◦ Should be approved by the National Development and Reform Commission 5-42
Third stage: 1999-2008 Third Stage: 1999-2008 Treasury bonds: cash Close-end funds The normal buying or selling of treasury bonds with A cose-end fund has a fixed number of fund shares ck exchange and can be bought and sold on that The seller"sells"the bonds and guarantees to buy them back at a given price in the future Close-end funds usually turn open when the pre-set The repurchase provides liquidity of TBs and reflects Open-end funds Products of 7-day, 14-day, 28-day 91-day and 182-day purchases are available in China. amount of shares the fund will issue Institutions use repurchases for short-term financing Most of the open-end funds in China are not listed in stock exchanges, but can be bought and sold in banks Third stage: 999-2008 Third Stage: 1999-2008 an index, a commodity or a basket of assets but the underlying stock of the issuing company at a fixed trades like a stock on an exchange. exercise price until the expiry date. because of their Warrants can be attached to bonds or preferred issued by security firms. shares Warrants in China was promoted in 2005 as on First ETE SSE 50 ETF was launched in 2004 approach of integrating the tradable and non-tradable Third Stage: 1999-2008 Third Stage: 1999-2008 PT(Particular Transfer) Adopted since April 22nd 1998 by both SSE For listed companies that have 3 co and SzSE, for listed firm with abnormal years of loss(negative net income), the trade in the stock exchange is halted. andard: negative net profit for most recent From July 1999, SSE and SzsE arranged PT two years or net asset lower than its book value of equity in the past year transferred on Friday. limit-up and limit-down set at 5% The limit-up and -down were first set but limit-down was cancelled in June 20 PT was abolished in jan I 2002 due much speculations on the Pt stocks. 8
8 Third Stage: 1999~2008 — Treasury bonds: cash ◦ The normal buying or selling of treasury bonds with cash — Treasury bond:repurchase ◦ The seller “sells” the bonds and guarantees to buy them back at a given price in the future ◦ The repurchase provides liquidity ofTBs and reflects the short-tem interest rate. ◦ Products of 7-day, 14-day, 28-day, 91-day and 182-day repurchases are available in China. ◦ Institutions use repurchases for short-term financing. 5-43 Third Stage: 1999~2008 — Close-end funds ◦ A close-end fund has a fixed number of fund shares. ◦ Closed-end funds are usually listed on a recognized stock exchange and can be bought and sold on that exchange. ◦ Close-end funds usually turn open when the pre-set existing period is due. — Open-end funds ◦ An open-end fund does not have restrictions on the amount of shares the fund will issue. ◦ Most of the open-end funds in China are not listed in stock exchanges,but can be bought and sold in banks or website of fund companies. 5-44 Third Stage: 1999~2008 — ETF(Exchange-traded funds) ◦ An ETF is an investment (open-end) fund that tracks an index, a commodity or a basket of assets but trades like a stock on an exchange. ◦ ETFs are attractive as investments because of their low costs,tax efficiency, and stock-like features. ◦ Investors can only buy or sell the ETF with the underlying basket of stocks. ◦ The minimum of trading amount is 100 thousand shares. ◦ First ETF, SSE 50 ETF, was launched in 2004. 5-45 Third Stage: 1999~2008 — Warrants ◦ A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date. ◦ Warrants can be attached to bonds or preferred stocks or be detached and traded separately. ◦ Warrants are issued by private parties,typically the corporation on which a warrant is based, but can also be issued by security firms. ◦ Warrants in China was promoted in 2005 as one approach of integrating the tradable and non-tradable shares. 5-46 Third Stage: 1999~2008 — ST(Special Treatment) ◦ Adopted since April 22nd 1998 by both SSE and SZSE, for listed firm with abnormal financial status ◦ Standard: negative net profit for most recent two years; or net asset lower than its book value of equity in the past year ◦ limit-up and limit-down set at 5% 5-47 Third Stage: 1999~2008 — PT(Particular Transfer) ◦ For listed companies that have 3 consecutive years of loss (negative net income), the trade in the stock exchange is halted. ◦ From July 1999, SSE and SZSE arranged PT mechanism, by which the stocks can be transferred on Friday. ◦ The limit-up and –down were first set at 5%, but limit-down was cancelled in June 2000. ◦ PT was abolished in Jan.1 2002 due to too much speculations on the PT stocks. 5-48
Third stage: 1999-2008 Third Stage: 1999-2008 . ST S: stocks that have not started the reform on negative net profit for consecutive 3 years, in the risk of delisting ST: stocks with poor performance Delisting SST: poor performing stocks that have not Adopted since Feb 25, 2005 started the reform on non-tradable shares Stocks for very poorly performing firms are SST: stocks that have made negative net profit not allowed traded in the stock for consecutive 3 years, in the risk of cease SST: stocks that have not started the reform on non-tradable shares and in the risk of cease listing Third stage: 999-2008 Third Stage: 1999-2008 Stock Market(SSE Composite Index, 00000I ss 牌L193-11951419191420-1-加12051-1 Third Stage: 1999-2008 Third Stage: 1999-2008 Monthly PIE Turnover ratio 995 96 1399|920002012002 oo JanoI jav02 panny lano Jan/s Janos Jane, Jan/D8 Shanghai· Shenzhen
9 Third Stage: 1999~2008 — *ST ◦ negative net profit for consecutive 3 years, in the risk of delisting — Delisting ◦ Adopted since Feb 25th , 2005 ◦ Stocks for very poorly performing firms are not allowed to be traded in the stock exchange 5-49 5-50 Third Stage: 1999~2008 — S: stocks that have not started the reform on non-tradable shares ； — ST: stocks with poor performance — SST: poor performing stocks that have not started the reform on non-tradable shares — *ST: stocks that have made negative net profit for consecutive 3 years, in the risk of cease listing — S*ST: stocks that have not started the reform on non-tradable shares and in the risk of cease listing 5-51 Shanghai Stock Exchange Composite Index 0 500 1000 1500 2000 2500 1991-1-11993-1-1 1995-1-11997-1-11999-1-1 2001-1-12003-1-12005-1-1 Third Stage: 1999~2008 5-52 Third Stage: 1999~2008 — Stock Market (SSE Composite Index，000001.ss) Third Stage: 1999~2008 — Monthly P/E 5-53 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 Jan/99 Jan/00 Jan/01 Jan/02 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Shanghai Shenzhen Third Stage: 1999~2008 — Turnover Ratio 5-54 0 200 400 600 800 1000 1200 1400 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Shanghai Shenzhen
Third stage: 1999-2008 Fourth Stage: 2009-Present Speculative indicators . Speculative indicators The Chinese state Council released the 4. NYSE in sse trillion stimulus package plan on Nov 5, 2008 P/E Ratio: 20-30 P/E Ratio: 40-60 The stock market responded very quickly on the second day, and recovered by 70% in 8 00~1000% months but came into the bear when the Volatility: 15-25% government exited the stimulus plan in 201I Top-Bottom Gap: ChiNext established in Oct, 2009 10-20% T-bond futures trading restarted in Sept. 2013 Fourth Stage: 2009-Present Fourth Stage: 2009-Present SSE Composite Index fT i -SZSE Component I -SSE Composite Index Fourth Stage: 2009-Present Fourth Stage: 2009-Present ●SSE SZSE 2力 sAdr Cpertndte maes leal Mabe tep Total Theoe
10 5-55 Third Stage: 1999~2008 — Speculative indicators in NYSE ◦ P/E Ratio: 20~30 ◦ Turnover Ratio: 50%~100% ◦ Volatility:15~25% ◦ Top-Bottom Gap: 10~20% — Speculative indicators in SSE ◦ P/E Ratio: 40~60 ◦ Turnover Ratio: 200~1000% ◦ Volatility:20~60% ◦ Top-Bottom Gap: 10~30% Fourth Stage: 2009-Present — The Chinese State Council released the 4- trillion stimulus package plan on Nov 5, 2008 — The stock market responded very quickly on the second day, and recovered by 70% in 8 months, but came into the bear when the government exited the stimulus plan in 2011 — ChiNext established in Oct, 2009 — Index futures launched in April. 2010 — T-bond futures trading restarted in Sept. 2013 5-56 Fourth Stage: 2009-Present — SSE Composite Index 5-57 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2008-01-04 2008-03-07 2008-05-09 2008-07-11 2008-09-12 2008-11-21 2009-01-23 2009-04-03 2009-06-05 2009-08-07 2009-10-09 2009-12-11 2010-02-12 2010-04-23 2010-06-25 2010-08-27 2010-10-29 2010-12-31 2011-03-04 2011-05-06 2011-07-08 2011-09-09 2011-11-18 2012-01-20 2012-03-30 2012-06-01 2012-08-03 2012-10-12 2012-12-14 2013-02-22 2013-04-26 2013-06-28 SSE Composite Index Fourth Stage: 2009-Present — SZSE Component Index 5-58 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 2008-11-07 2008-12-31 2009-03-06 2009-04-30 2009-06-26 2009-08-21 2009-10-16 2009-12-11 2010-02-05 2010-04-09 2010-06-04 2010-07-30 2010-09-21 2010-11-19 2011-01-14 2011-03-11 2011-05-06 2011-07-01 2011-08-26 2011-10-28 2011-12-23 2012-02-24 2012-04-20 2012-06-15 2012-08-10 2012-10-12 2012-12-07 2013-02-01 2013-04-03 2013-05-31 SZSE Component Index Fourth Stage: 2009-Present — SSE 5-59 Fourth Stage: 2009-Present — SZSE 5-60