SSE Newsletter. Vol. 2. Highlights:

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1 Vol. 2 SSE Newsletter February 2013 Highlights: SSE Composite fluctuated with a downward trend in February The SSE has sorted out and appraised the business rules of The SSE has formulated the SSE Detailed Rules (Draft) for Regulatory Measures and Disciplinary Sanctions on Listed Companies. The CPI of China reflected an upward trend. The CSRC has promulgated Regulations on Supervision and Administration of Subsidiaries of Securities Firms (Consultation Draft) and Tentative Rules for Management of Publicly Offered Securities Investment Fund Carried out by Asset Management Institutions etc. Shanghai Stock Exchange 1

2 1. Overview of SSE Market For the last 12 months (March 2012 February 2013), the SSE Composite Index started at (closing price, hereinafter inclusive) on Mar. 1 st The index reached its highest point ( ) on Mar. 2 nd 2012 and the lowest ( ) on Dec. 3 rd In February 2013, the index generally reflected a downward trend, reaching the lowest point of on Feb. 26 th. There have been 242 trading days from March 2012 to February The daily average turnover value is USD billion for the period. The single day turnover value peaked at USD billion on Mar. 14 th 2012, and the lowest of USD 5.26 billion on Nov. 26 th The daily turnover is USD billion for February, which showed slight decrease compared to that of the previous month. In terms of accumulated turnover of February 2013, the top 3 sectors are Manufacturing (USD billion), Finance & Insurance (USD 67.9 billion) and Real Estate (USD 18.8 billion). Shanghai Stock Exchange 2

3 In terms of money flow, the following 3 sectors delivered positive figures in February 2013: Education, Health & Social Service and Rent & Business Service. The volumes are USD 11.1 million, USD 1.4 million and USD 1.1 million respectively. Among the sectors with negative figures in February 2013, the top 3 are Manufacturing (USD million), Finance & Insurance (USD million) and Real Estate (USD million). In February 2013, the daily average trading volume of ETF is USD 539 million, which represents a growth rate of 181% compared with USD 192 million in February The volume reached its highest point of USD 947 million on Feb. 21 st 2013 and the lowest of USD 329 million on Feb. 22 nd SSE Updates The SSE has completely sorted out and appraised the business rules of 2012, and released an announcement on abolishment of the 6 th batch of business rules (involving 33 kinds of business rules) to the market. After the clean-up work, the SSE has 189 kinds of valid business rules, which are divided into 7 categories, "Organization", "Issuance", "Listing", Shanghai Stock Exchange 3

4 "Trading", "Membership", "Service", and "Fee", or 4 levels of "Basic Business Rule", "Detailed Rule (Measure) for Implementation", "Business Guideline", and "Business Notice". The SSE, for the purpose of facilitating the understanding and application by market participants, has been rationalizing the currently valid business rules with binding force and continuous validity year by year, and appraising and checking the formulation and implementation of business rules, in a bid to make the rules more effective. So far, six rounds of regular rationalization of businesses rules have been completed, abolishing 217 kinds of business rules. The public bidding invitation for the 24 th SSE Joint Research Plan is launched to boost the research and marketization of China's securities market. The SSE has launched 23 SSE Joint Research Plans. The plans aim to make full use of relevant domestic and foreign research resources, make intensive research on hot and frontier issues of China's securities market in a standardized, precise and pragmatic manner, improve market research, and promote exchange of excellent research results. All these efforts are expected to provide independent, rational, high-level, and forward-looking policy suggestions and implementation schemes for the development of China's securities market. On February 5 th, 2013, SSE InfoNet Ltd. (SSE InfoNet) provided the pilot service for the performance briefing of Chengdu B-Ray Media Co., Ltd. (B-Ray Media) through its online platform and hardware facilities, in a bid to improve the market service of the SSE, give another communication channel for listed companies and investors, and enhance the transparency of listed companies. The SSE has formulated the SSE Detailed Rules (Draft) for Regulatory Measures and Disciplinary Sanctions on Listed Companies and worked out the relevant remarks on drawing up the detailed rules, in a bid to further urge listed companies and relevant obligors of information disclosure to fulfill the obligation of information disclosure according to laws, standardize the SSE s self-regulation and supervision, and protect the legitimate rights and interests of investors. The SSE is now soliciting public opinions on the above-mentioned draft. The SSE has formulated the SSE Business Guidelines on Direct Channel for Listed Companies Information Disclosure to further improve the quality and efficiency of listed companies information disclosure, urge market participants to fulfill their responsibilities, and protect the legitimate rights and interests of investors. The guidelines shall take effect on July 1 st, According to Security & Futures Industry Statistical Indicators Norm Guide issued by the CSRC in January this year, China Securities Index Company has decided to adjust the constituent universe of SSE Enterprise Bond Index and CSI Enterprise Bond Index. The detachable convertible bond and enterprise bond are excluded from the universe. The corporate bond is reviewed and approved by the CSRC. The adjustment shall take effect on March 1 st, Shanghai Stock Exchange 4

5 3. Key Statistics of China CPI has been removing in a u-curve trend in the last twelve months. The YoY growth rate was 3.60% in March 2012, and reached the lowest point of 1.70% in October 2012 followed by a rebound in December (2.50%). In February 2013, the ratio increased to 3.20%. From March 2012 to February 2013, M2 generally kept its increasing momentum. M0 increased from USD 0.79 trillion in March 2012 to USD 0.96 trillion in February 2013; M2 increased from USD 14.2 trillion in March 2012 to USD 15.9 trillion in February Funds raised to new loan ratio is volatile on China s exchange market. The average from March 2012 to February 2013 is 6.0%, with the highest of 11.9% in December and the lowest of 2.7% in Sepetmber Shanghai Stock Exchange 5

6 4. Policy Updates on China's Capital Market The CSRC has promulgated Regulations on Supervision and Administration of Subsidiaries of Securities Firms (Consultation Draft) to solicit public opinions. In order to expedite the development of National SME Share Transfer System and provide SMEs with capital market services, the CSRC has promulgated Interim Measures for the Administrations of National SME Share Transfer System Co., Ltd. The Interim Measures are intended to address the following three issues: First, establishing National SME Share Transfer System, National SME Share Transfer System Co., Ltd. and the legal status of listed companies; Second, clarifying the functions of National SME Share Transfer System Co., Ltd., raising special requirements on its organizational structure, and identifying explicit requirements on its performance of self-supervision responsibilities; And third, establishing a basic regulatory framework for National SME Share Transfer System and stipulating that the CSRC shall exercise central supervision and administration by law while clarifying and highlighting the self-discipline and self-supervision responsibilities of National SME Share Transfer System Co., Ltd. The CSRC has promulgated two financial industry standards including Specification for Operation and Maintenance of Securities and Futures Information System and Elements of Futures Brokerage Contrac,.and Specification for Operation and Management of Securities and Futures Information System. The first provides guidelines for the operation and maintenance of information systems for securities and futures industries. The second identifies compulsory elements for the brokerage contract between futures companies and investors. The CSRC has issued Tentative Rules for Management of Publicly Offered Securities Investment Fund Carried Out by Asset Management Institutions. This is an important initiative to implement the core messages of the Securities Investment Fund Law as revised and develop an open, inclusive and diversified wealth management industry, creating channels for institutions other than fund management companies to engage in the management of publicly offered funds, contributing to the growth of institutional investors and promoting the long-term steady and healthy development of the capital markets. In order to facilitate the standardized and prudent operation of securities firms and ensure further reform and innovation in the securities industry, the CSRC has recently issued a notice to all relevant entities within its system, specifying arrangements for the onsite inspection of securities firms in The CSRC has required all securities firms to complete the self-examination regarding the aforesaid inspection matters by March 20, The CSRC will finish the onsite inspection of securities firms during the first half of 2013 and adopt stern legal measures towards any issues discovered during the process. The CSRC has held a press briefing to release Tentative Administrative Measures for Investments of Privately Offered Funds in Securities (Consultation Draft) and is seeking public comments on the Tentative Measures. The newly revised Securities Investment Fund Law has included non-publicly offered funds. Against this background, the CSRC drafted the Shanghai Stock Exchange 6

7 Tentative Measures under the authority granted by the law and in light of the current status of the asset management sector, in a bid to regulate the business activities of privately offered funds, protect the lawful rights and interests of investors and promote the sound development of the privately offered fund sector. The CSRC has held a press briefing to release the Decision on Revising Administrative Rule for Sales Costs of Open-end Securities Investment Funds (Consultation Draft). The CSRC has, in conjunction with industry associations, market entities and other institutions, carried out extensive survey and research to come up with the above-mentioned rules. The CSRC has issued an official notification, proposing to launch the 2012 annual inspection of securities investment consulting institutions and publicly announcing the criteria and arrangements for the annual inspection. In accordance with the requirements of the current annual inspection, institutions found with the 14 specified problems including weak internal control and failure to provide standard investment consulting services to clients will be ordered to make rectification within the specified time limit; institutions which found with the 15 specified problems including failure to maintain the qualification for securities investment consulting business will not be allowed to pass the annual inspection. The CSRC has promulgated the Rules Relating to Issues on Further Standardizing Establishment of Futures Business Sales Department. The Rules has came into effect on the date of promulgation. The CSRC has released the Administrative Rules for Asset Securitization Business of Securities Companies (Consultation Draft) and is now soliciting public opinions. The rules are expected to promote innovation of securities companies, diversify fixed income products, develop asset securitization business and improve the utilization efficiency of inventory assets. The CSRC has promulgated the Administrative Measures for Risk Control Indicators of Futures Companies and the Rules for Calculation Standards for Risk-based Capital Provisions of Futures Companies which will come into effect on July 1 st, QFII, RQFII & QDII As of Feb. 28 th, 2012, the approved quota for QFII, RQFII and QDII were USD billion, USD billion and USD billion respectively. The newly approved quota for QFII in February 2013 is USD 8.5 billion. On the other hand, the quota for QDII was reduced by USD 4.0 billion. Shanghai Stock Exchange 7

8 You may sign up for a free subscription to this newsletter by sending your name, company name, job title and telephone number to: SSE_GlobalBusiness@sse.com.cn Please feel free to contact Mr. Berton Yan at , or send an to pyan@sse.com.cn if you have any query. Disclaimer This newsletter is provided by the Shanghai Stock Exchange (hereinafter referred to as the 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 the SSE makes no guarantees of their accuracy and completeness. The contents, comments and forecasts are subject to change at any time by the SSE without prior notice. The 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 the SSE; otherwise, the SSE reserves the right to take any legal action at any time. Shanghai Stock Exchange 8 No.528 South Pudong Road, Shanghai, , PR.China