Stock & Investment

Shanghai stock market opens to foreign firms

After almost two-year bull market, the benchmark Shanghai Composite Index, which tracks both A and B shares, recorded a dismal performance since October 2007.  In 2008, The Shanghai Stock Exchange (SSE) suffered an annual loss of over 60%, plunging from 4380 points to 1820 points and being the worst performing market in Asia.  SSE Governor Geng Liang and President Zhang Yujun attended SSE’s sixth annual Press Symposium early April, and Geng


stressed that the primary mission of the SSE in 2009 is to maintain stability in market development.  Among the items Geng emphasized are trading seccurity and smooth operation of the market, the construction of blue chip market, market trading machanism, product innovation such as the SHSE-SZSE300 Index ETF as well as the bond market.  

Shanghai, a city historically with deep ties to the western world, has been an international business center, but the Chinese capital market in some ways is still relatively isolated from the international markets.  In late March, the State Council announced China aims to buildShanghai into an international financial and shipping center by 2020, and mapped out guidelines including more sophiscated investment products and favorable tax policies to attract international investors.  Under this plan, as the Cabinet said, Shanghai will build a multi-layered financial market system, promote the opening of financial services in the city, and ensure financial stability in the coming years.  Investors embrace the idea of buildingShanghai into an international financial center.  Responding to the news, the Shanghai indext was increased by 3.1% to 2361.70, and the last high point was 3.0% increase to 2389.39 on February 16.  On April 22 however, as energy companies and metal producers plunged, Shanghai key index dropped nearly 3% to dive below 2,500 points. The benchmark Shanghai Composite Index lost 2.94%, or 74.48 points, to close at 2,461.35 points.  On May 1, the State Council said foreign companies would be allowed to raise money through the Shanghai Stock Exchange and also to issue bonds in China.  For the first time ever, China will allow foreign companies to list in Shanghai in an attempt to turn the city into a financial center like New York and London.  See related article.