SSE Newsletter. July Vol. 26. Highlights:

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1 Vol. 26 SSE Newsletter July 2015 Highlights: SSE Composite fell by 14.34% in July 2015, while trading volume showed significant decrease compared with that of the previous month SSE released the revised SSE Detailed Rules for Implementation of Margin Trading and Securities Lending SSE, SZSE and CSDC plan to lower the charging standards for A-share trading and settlement China Securities Finance Corporation Limited will increase its registered capital from 24 billion RMB to 100 billion RMB China Securities Regulatory Commission encourages and facilitates major shareholders and board members, supervisory board members and senior management to increase shareholding

2 1. Overview of SSE Market For the last 12 months (August 2014 July 2015), the SSE Composite Index reached the highest at (closing price, same below) on June 12 th, 2015 and the lowest at on August 1 st, In July 2015, the index fell by 14.34%. There have been 245 trading days from August 2014 to July The daily average turnover value was USD billion for the period. The single day turnover value peaked at USD billion on June 8 th, 2015 and reached the lowest at USD billion on August 29 th, The daily average turnover was USD billion for July 2015, which showed a significant decrease compared to that of the previous month. In terms of industry-wide accumulated turnover of July 2015, the top 3 sectors were Manufacturing (USD billion), Finance & Insurance (USD billion), and Transportation (USD billion).

3 For the last 12 months (August 2014 July 2015), the monthly average number of new A share accounts was 2,634,300. The single month number of new accounts peaked at 7,198,600 in April 2015, and reached the lowest at 322,300 in August As of July 2015, the total number of A-share accounts was million. In July 2015, the daily average trading volume of ETF was USD 7.66 billion, which represented an increase of 336% compared with USD 1.76 billion in July The volume reached its highest point at USD billion on July 6 th, 2015 and the lowest at USD 4.52 billion on July 31 st, 2015.

4 2. SSE Updates On July 1 st, the (SSE) released the revised SSE Detailed Rules for Implementation of Margin Trading and Securities Lending (the Rules for short) in order to enhance risk management on the business of margin trading and securities lending, propel steady growth of the business and protect investors legitimate rights and interests. The revision shall take effect on the release date. Considering that the whole market will need some time for business and technology preparation, Paragraph 3 of Article 12 in the revised Rules will not be implemented temporarily, with the implementation time subject to further notification by the SSE. The Notice of Revising Articles 49 and 50 in SSE Detailed Rules for Implementation of Margin Trading and Securities Lending issued by the SSE on February 21 st 2014, the Notice on Relevant Issues about Taking ETFs as Target Securities for Margin Trading and Securities Lending issued on May 24 th 2013, and the Notice on Relevant Issues about Participation in Margin Trading and Securities Lending with Shares with Sales Limit and Stock Shares with Terminated Sales Limit in Listed Companies issued on March 18 th 2013 shall be abolished simultaneously. On July 1 st, the SSE announced that in order to further cut investors trading cost, the SSE, the Shenzhen Stock Exchange (SZSE) and the China Securities Depository and Clearing Co. (CSDC), upon study, plan to lower the charging standards for A-share trading and settlement. The handling fee for A-share trading charged by the SSE and the SZSE will be adjusted from to of trading amount both ways, dropped by 30%, among which will be forwarded to China Securities Investor Protection Fund Corporation Limited and charged by the exchange. Besides, the transfer fee for A-share trading charged by the CSDC is adjusted from 0.03 of trading face value on the SSE and on the SZSE respectively to 0.02 of trading face value both ways for both exchanges, a drop of about 33% according to the market data of the past two years. The SSE, the SZSE and the CSDC will strive to complete relevant preparatory work and implement these adjustments on August 1.

5 3. Key Statistics of China CPI has remained at a low level in the last twelve months. The YoY growth rate of CPI was 2.00% in August 2014, which is the peak during the period. CPI decreased to 0.76% in January 2015, the lowest during the period. From August 2014 to July 2015, M0 generally remains stable and is at USD 0.94 trillion in July M2 increased steadily, rising from USD 19.0 trillion in August 2014 to USD 21.5 trillion in July Ratio of raised funds on China s exchange market to amount of new loan was volatile. The average in the past 12 months was 9.4%, with the highest at 19.5% in December 2014 and the lowest at 2.8% in January 2015.

6 4. Updates on China s Capital Market On July 1 st, the China Securities Regulatory Commission (CSRC) released the revised Management Rules for Margin Trading and Securities Lending Business of Securities Companies (the Management Rules ), which will be implemented on the release date. The and the Shenzhen Stock Exchange also released Detailed Rules for Implementation of Margin Trading and Securities Lending (the Detailed Rules ). The major revisions of the Management Rules and the Detailed Rules include the following: first, to establish counter-cyclical adjustment mechanism for margin trading and securities lending business; second, to reasonably define the scope of margin trading and securities lending business; third, to allow contact extension for margin trading and securities lending; fourth, to improve standards and methods of collateral treatment after default by clients. On July 3 rd, the CSRC decides to carry out the third capital increase and share expansion for the China Securities Finance Corporation Limited (CSF). The current shareholders will be in charge of increasing the registered capital from 24 billion RMB to 100 billion RMB. After the capital increase and share expansion, the CSF will also raise funds from multiple channels in order to expand business scale and protect the stability of the capital market. On July 8 th, in order the stabilize the market and avoid systemic financial risk, and to support industrial capital to use the capital market to expand and improve business, the CSRC released relevant rules to allow industrial capital that has recently reduced stock holdings to immediately increase holding of stocks of its own company on the secondary market through specific asset management plans with securities firms, among other methods; for stocks whose price has dropped sharply in recent days (with accumulated drop of more than 30% in ten consecutive trading days), board members, supervisory board members and senior management are not restrained by the time window limit when increasing holding of their own company s stocks; major shareholders of listed companies who hold no less than 30% of the company can immediately hold an additional 2% without having to wait for 12 months. These rules will help industrial capital to take this opportunity to increase holding of its own company s stock at a reasonable price, and at the same time prevent irrational drop of the company s stock price. In addition, after coordination with the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), majority shareholder of state-owned listed companies and the board members, supervisory board members and senior management of such companies can after internal decision procedures increase stock holding of their own company through the secondary market without asking the SASAC for approval beforehand. At the same time, the Ministry of Finance stated its support for state-owned financial companies to increase holding of their own stocks when their stock prices are lower than reasonable level.

7 5. QFII, RQFII & QDII As of July 29 th, 2015, the approved quota for QFII, RQFII and QDII were USD billion, USD billion and USD billion respectively. The newly approved quota for QFII and RQFII in July 2015 were USD 1.0 billion and USD 1.3 billion respectively. There was no newly approved quota for QDII. 6.Shanghai-Hong Kong Stock Connect In July 2015, the average daily quota usage percentage for Shanghai Stock Connect was -9.55%. The daily quota usage percentage on July 3 rd was 54.97%, which was the peak during the period. The daily quota usage percentage on July 6 th was %, the lowest during the period. In July 2015, the average daily quota usage percentage for Hong Kong Stock Connect was 0.45%. The daily quota usage percentage on July 10 th was 19.62%, which was the peak during the period. The daily quota usage percentage on July 8 th was %, the lowest during the period.

8 You may sign up for a free subscription to this newsletter by sending your name, company name, job title and telephone number to: globalbusiness@sse.com.cn. Please feel free to contact Mr. Wen Hu at , or send an to wenhu@sse.com.cn if you have any query. Disclaimer This newsletter is provided by the (hereinafter referred to as SSE ) and intended only for those whom it is addressed to. Any unauthorized quotation, reprinting and/or distribution to a third party may be held legally liable. The contents and comments herein are for information purposes only and SSE makes no guarantees of their accuracy and completeness. The contents, comments and forecasts are subject to change at any time by SSE without prior notice. SSE holds the copyright of this newsletter and reserves all rights. Any reproduction, replication, quotation and/or reprinting by any individual or entity is prohibited without prior written consent of SSE; otherwise, SSE reserves the right to take any legal action at any time. No. 528 South Pudong Road, Shanghai, , P. R. China