SSE Newsletter. April Vol. 15. Highlights:

Transcription

1 Vol. 15 SSE Newsletter April 2014 Highlights: SSE Composite of April 2014 remained stable, while trading volume showed slight decrease compared with that of the previous month. Premier Li Keqiang said in his keynote speech at the Boao Forum for Asian Annual Conference 2014 that China will actively create conditions to establish a Shanghai-Hong Kong Stock Exchanges Connectivity Mechanism The China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission (SFC) of Hong Kong release a Joint Announcement, which approves, in principle, the development of the Shanghai-Hong Kong Stock Connect pilot program SSE to promote transformation of information disclosure regulation through annual report auditing

2 1. Overview of SSE Market For the last 12 months (May 2013 April 2014), the SSE Composite Index reached the highest at (closing price, hereinafter inclusive) on May 29 th, 2013 and the lowest at on June 27 th, In April 2014, the index generally remained stable. There have been 265 trading days from May 2013 to April The daily average turnover value was USD billion for the period. The single day turnover value peaked at USD billion on December 2 nd, 2013 and reached the lowest at USD 7.73 billion on January 20 th, The daily average turnover was USD billion for April, which showed a slight decrease compared to that of the previous month. In terms of accumulated turnover of April 2014, the top 3 sectors were Manufacturing (USD 110 billion), Finance & Insurance (USD 45 billion) and Real Estate (USD 21 billion).

3 For the last 12 months (May 2013 April 2014), the monthly average number of A share new holder accounts was 210,000. The single month number of new holder accounts peaked at 340,000 in March 2014, and reached the lowest at 169,000 in April As of April 2014, the total number of A-share holder accounts was million. In April 2014, the daily average trading volume of ETF was USD 1258 million, which represented a growth rate of 159% compared with USD 485 million in April The volume reached its highest point at USD 1,550 million on April 10 th, 2014 and the lowest at USD 1055 million on April 29 th, 2014.

4 2. SSE Updates On April 10, Premier Li Keqiang said in his keynote speech at the Boao Forum for Asian Annual Conference 2014, We will actively create conditions to establish a Shanghai-Hong Kong Stock Exchanges Connectivity Mechanism, and further promote two-way opening-up and sound development of the capital markets in China s Mainland and Hong Kong. On the same day at noon, the China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission (SFC) of Hong Kong release a Joint Announcement, which approves, in principle, the development of the Shanghai-Hong Kong Stock Connect pilot program by the (SSE), the Hong Kong Exchanges & Clearing Ltd. (HKEx), and China Securities Depository and Clearing Corporation Limited (CSDC). The move is an important breakthrough in the opening-up of the capital market in China s Mainland and also a major innovation for realizing the goal of promoting two-way opening-up of the capital markets put forward at the 3rd Plenary Session of the 18th CPC Central Committee. It will propel the development of the capital markets in China s Mainland and Hong Kong as well as the progress of RMB s internationalization. After the launching of the Shanghai-Hong Kong Stock Connect pilot program, investors in the markets of China s Mainland and Hong Kong can entrust local securities companies (brokers) to trade eligible shares listed on the other s market through the order-routing service to be provided by the SSE and the Stock Exchange of Hong Kong Ltd. (SEHK). Clearing institutions of both sides will establish a direct link for cross-boundary clearing. Each of them will become each other s clearing participant and provide clearing services for the pilot program as a nominal holder of the stocks to be purchased by investors of both sides. This innovative mechanism will help to introduce international investors into the Shanghai market, further improve the investor structure there, and attract more overseas capital, so as to inject new vitality for the sustainable growth of the Shanghai market and facilitate the investment of China s Mainland investors in overseas capital markets. The SSE will, in line with the Joint Announcement, negotiate with relevant parties for reaching cooperation agreements on trading and clearing as soon as possible and make preparations for relevant rules, business lines, and technologies, with an aim to officially launch the business of the Shanghai-Hong Kong Stock Connect pilot program within 6 months. On April 29, the 2014 Meeting on National Securities and Futures Regulatory Work has arranged the work on regulatory transformation, in which it points out that securities exchanges will be in charge of front-line regulation on the information disclosure related to periodical reports and temporary announcements of listed companies, establish authority on information disclosure regulation, and strengthen self-disciplinary management. In line with this requirement, the (SSE) has, in this year s annual report auditing, carefully considered such issues as how to promote transformation of self-disciplinary regulation and how to do well in front-line regulation work on investors-oriented information disclosure, adopted an array of measures on concurrent and posteriori supervision, and explored new ideas on regulatory transformation through practice, with some good results achieved. The first is to ensure the normal operation of Direct Channel for Information Disclosure. The second is to urge listed companies to timely correct and clarify typical mistakes in their annual reports. The third is to move the focus of

5 annual report examination to the matters concerned by investors. The fourth is to deal with non-compliance in information disclosure. Relevant person of the SSE said that the SSE, as a market organizer and a self-regulatory organization, should keep up with the times, adapt itself proactively to the needs of the market and investors, and accelerate the transformation of self-disciplinary regulation. Next, the SSE will, on the basis of the preliminary work on annual reports, continuously gather professional personnel to strengthen regulation on the annual report disclosure, analyze and summarize listed companies annual reports, and guide them to enhance the effectiveness and pertinence of information disclosure, thus laying a solid foundation for continuous improvement of the quality of their annual reports. 3. Key Statistics of China CPI has declined after rise in the last twelve months, and rose again from March 2014 to a YoY growth rate of 3.4% in April, which is the peak during the period. CPI decreased to 1.95% in February 2014, the lowest in the time interval. From May 2013 to April 2014, M0 generally remained stable, with the only sharp rise to USD 1.21 trillion in January 2014, and fell back to USD 0.93 trillion in April M2 generally kept its increasing momentum, rising from USD 16.5 trillion in May 2013 to USD 18.6 trillion in April Ratio of raised funds to new loan was volatile on China s exchange market. The average from May 2013 to April 2014 was 5.4%, with the highest at 12.7% in December 2013 and the lowest at 1.4% in June 2013.

6 4. Policy Updates on China s Capital Market On April 10, the China Securities Regulatory Commission and the Securities and Futures Commission have approved, in principle, the development of a pilot programme (Shanghai-Hong Kong Stock Connect) for establishing mutual stock market access between Mainland China and Hong Kong. Here is an EXCERPT of this announcement, which describes the principles under which it is expected that Shanghai-Hong Kong Stock Connect will operate. I. SSE and SEHK will enable investors to trade eligible shares listed on the other s market through local securities firms or brokers. Shanghai-Hong Kong Stock Connect comprises a Northbound Trading Link and a Southbound Trading Link. Under the Northbound Trading Link, investors, through their Hong Kong brokers and a securities trading service company to be established by SEHK, will be able to place orders to trade eligible shares listed on SSE by routing orders to SSE. Under the Southbound Trading Link, eligible investors, through Mainland securities firms and a securities trading service company to be established by SSE, will be able to place orders to trade eligible shares listed on SEHK by routing orders to SEHK. II. Shanghai-Hong Kong Stock Connect is an important step in the opening up of the China capital market and will enhance capital market connectivity between Mainland China and Hong Kong, bringing various benefits, including: a. The programme will enhance the overall strength of China s capital markets through a new and significant collaborative mechanism. b. Shanghai-Hong Kong Stock Connect will further consolidate the position of Shanghai and Hong Kong as financial centres, enhance the attractiveness of both markets to international investors. c. Shanghai-Hong Kong Stock Connect will expand investment channels for offshore RMB funds and facilitate an orderly flow of RMB funds between the two markets. III. Shanghai-Hong Kong Stock Connect will be founded on the existing rules and regulations and operational models governing trading and clearing in each market. Set out below are the five principal elements of Shanghai-Hong Kong Stock Connect: a. Applicable trading, clearing and listing rules. Trading and clearing arrangements will be subject to the regulations and operational rules of the market where trading and clearing take place. b. Clearing. ChinaClear and HKSCC will establish a direct link for the cross--boundary clearing. Each of them will become each other s clearing participant to provide clearing services for Shanghai-Hong Kong Stock Connect. c. Eligible shares. Under the pilot programme, shares eligible to be traded through the Northbound Trading Link will comprise all the constituents of the SSE 180 Index and SSE 380 Index, and shares of all SSE-listed companies which have issued both A shares and H shares. The scope of Shanghai-Hong Kong Stock Connect is subject to further adjustment following launch of the pilot programme. d. Quotas. Trading under Shanghai-Hong Kong Stock Connect will, initially, be subject to a maximum cross-boundary investment quota, together with a daily quota that will be monitored on a real time basis. The Southbound Trading Link will be limited to an

7 aggregate quota of RMB250 billion and a daily quota of RMB10.5 billion. Quotas may be adjusted in future. IV. Both the CSRC and the SFC will actively enhance cross-boundary regulatory and enforcement cooperation. Each of them will take all necessary measures to establish, in the interests of investor protection, an effective regime under Shanghai-Hong Kong Stock Connect to respond to all misconduct in either or both markets on a timely basis. V. The two Commissions will establish a dedicated liaison mechanism for Shanghai-Hong Kong Stock Connect to deal with any issues that may be encountered during the pilot programme which may require joint resolution. SSE, SEHK, ChinaClear and HKSCC will collaborate with each other to develop the operational and other components of Shanghai-Hong Kong Stock Connect prior to launch, including all necessary arrangements to ensure an orderly market and prudent risk management. Launch of Shanghai-Hong Kong Stock Connect will only take place once relevant trading and clearing rules and systems have been finalized, all regulatory approvals have been granted, market participants have had sufficient opportunity to configure and adapt their operational and technical systems. All necessary investor education programmes must also be in place. SSE, SEHK, ChinaClear and HKSCC will, during the development of Shanghai-Hong Kong Stock Connect, and prior to launch, liaise with market participants in relation to all rules, systems and technical requirements relevant to their operations. Further announcements will be made as development work progresses, including as to the expected timetable. It should take approximately six months from the date of this announcement to complete the preparation for formal launch. On April 18, China Securities Regulatory Commission (CSRC) concluded a Memorandum of Understanding(MOU)Regarding Securities and Futures Regulatory Cooperation with Jersey Financial Services Commission (FSC). The MOU was signed by CSRC Chairman XIAO Gang and John Harris, Director General of FSC. The MOU between the two regulators will enhance exchanges of views and cooperation in the field of securities and futures supervision, and promote sound development of capital markets in both jurisdictions. It marks a new stage in securities regulatory cooperation between the two jurisdictions. Since its establishment in October 1992, the CSRC has signed 58 MOUs with securities and/or futures regulators from 54 countries or regions worldwide. 5. QFII, RQFII & QDII As of April 30 th, 2014, 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 April 2014 was USD 0.8 billion and USD 2.4 billion respectively. The approved quota for QDII decreased by USD 12.3 billion in April 2014.

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