Vol. 28 SSE Newsletter September 2015 Highlights: SSE Composite fell by 4.78% in September 2015, while trading volume showed significant decrease compared with that of the previous month SSE, SZSE and CFFEX plan to introduce an index circuit breaker mechanism, and solicits opinions from the public SSE updates and publishes Guidance Document on Industry Information Disclosure of Listed Companies CSRC states that the bubbles and risks in the stock market have been largely released and relieved, that the internal stability of the market has been enhanced, and that in the next step it will organically combine the tasks of market stabilization, market restoration and market construction The CSRC, the French Financial Markets Authority (AMF), the Asset Management Association of China, and the French Association of Asset Management jointly held the Sino-French Forum on Asset Management
1. Overview of SSE Market For the last 12 months (October 2014 September 2015), the SSE Composite Index reached the highest at 5166.35 (closing price, same below) on June 12 th, 2015 and the lowest at 2290.44 on October 27 th, 2014. In September 2015, the index fell by 4.78%. There have been 244 trading days from October 2014 to September 2015. The daily average turnover value was USD 84.07 billion for the period. The single day turnover value peaked at USD 208.06 billion on June 8 th, 2015 and reached the lowest at USD 18.06 billion on October 27 th, 2014. The daily average turnover was USD 44.69 billion for September 2015, which showed a significant decrease compared to that of the previous month. In terms of industry-wide accumulated turnover of September 2015, the top 3 sectors were Manufacturing (USD 390.3 billion), Finance & Insurance (USD 115.7 billion), and Transportation (USD 57.7 billion).
For the last 12 months (October 2014 September 2015), the monthly average number of new A share accounts was 2,916,800. The single month number of new accounts peaked at 7,198,600 in April 2015, and reached the lowest at 417,300 in October 2014. As of September 2015, the total number of A-share accounts was 128.32 million. In September 2015, the daily average trading volume of ETF was USD 5.71 billion, which represented an increase of 51.63% compared with USD 3.76 billion in September 2014. The volume reached its highest point at USD 6.67 billion on September 1 st, 2015 and the lowest at USD 4.57 billion on September 11 th, 2015.
2. SSE Updates On September 7 th, the (SSE) announced that the SSE, the Shenzhen Stock Exchange (SZSE) and the China Financial Futures Exchange (CFFEX), upon approval by the China Securities Regulatory Commission, plan to introduce an index circuit breaker mechanism under the precondition that the existing price limit mechanism for the individual stocks is kept, in a bid to control the risk of dramatic fluctuations in the market, further perfect the trading mechanism in China s securities market, maintain the market order, and protect the investors rights and interests. The general arrangement for the circuit breaker mechanism for index is as follows: when the daily price fluctuation of CSI 300 Index reaches a threshold value, trading of all the stocks, convertible bonds, detachable bonds, stock options and stock-related products on the SSE and the SZSE will be suspended, and that of all the stock index futures contracts on the CFFEX will be suspended as well; after the time for the trading suspension expires, trading will be resumed or the market will be closed subject to different conditions. The circuit breaker mechanism takes CSI 300 Index as the benchmark index. Two threshold values, 5% and 7%, for the circuit breaker mechanism are set as both upper and lower price limits, and each value could be reached only once everyday at most. When the first threshold value of 5% is reached, trading will be suspended for 30 minutes, after which a call auction will be held and then the continuous trading of that day will resume. If the first threshold value of 5% is reached at or after 14:30, or the second threshold value of 7% is reached at any time of the whole day, trading will be suspended till the market closing. If the circuit breaker mechanism lasts till the market closing at 15:00 with the trading not resumed, relevant securities closing prices will be the weighted average prices of all the transactions (including the last one) within one minute before the last transaction on the very day. The SSE, the SZSE and the CFFEX have, according to the above key points, respectively supplemented special regulations on the implementation of the circuit breaker mechanism in their relevant trading rules, and solicited opinions from the public in September 2015. On September 11 th, the SSE announced that according to laws and regulations, the SSE Stock Listing Rules and other rules, the SSE has revised its previous guidance documents on information disclosure for listed companies in real estate and coal industries, and worked out the SSE Guidance Document on Industry Information Disclosure of Listed Companies General Regulations and industry-specific Guidance Documents on Information Disclosure of Listed Companies for electric power, retail, automobile manufacturing, and pharmaceutical manufacturing industries, in a bid to guide the listed companies to disclose industry operation information and enhance effectiveness of their information disclosure.
3. Key Statistics of China CPI has remained at a low level in the last twelve months. The YoY growth rate of CPI was 1.96% in August 2015, which is the peak during the period. CPI decreased to 0.76% in January 2015, the lowest during the period. From October 2014 to September 2015, M0 generally remains stable and is at USD 0.97 trillion in September 2015. M2 increased steadily, rising from USD 19.0 trillion in October 2014 to USD 21.6 trillion in September 2015. Ratio of raised funds on China s exchange market to amount of new loan was volatile. The average in the past 12 months was 9.1%, with the highest at 19.5% in December 2014 and the lowest at 2.8% in January 2015.
4. Updates on China s Capital Market On September 6 th, the China Securities Regulatory Commission (CSRC) spokesperson stated in reply to questions from Xinhua News Agency journalists that stock markets are bound to have fluctuations, going up and down. However, in recent months China s stock market has shown abnormal volatility, going through a process of rapid rising and falling. In July 2014 the SSE Composite Index reached 2033 at its lowest, and under the joint influence of various factors, it reached 5178 on June 12 th 2015, rising 154% in total. Bubbles will appear after the stock market booms too fast and by too much, and the subsequent fall and adjustment are inevitable. However, as the stock market falls back rapidly and even falls in panic, leveraged finance accelerates the fall after it facilitated the rise, some financial products hit the cut loss line and are forced to exit the position, and as cash and futures markets fall in reciprocity, market liquidity risk and systematic financial risk become prominent issues. In face of this situation, the related departments and institutions took unified and coordinated action, promptly took various decisive measures to sustain the stability of the stock market, and prevented possible systematic risk. Currently, the bubbles and risks in the stock market have been largely released and relieved, trading is mostly back to normal in the market, liquidity is fairly abundant, and the internal stability of the market has been enhanced. Next, the CSRC will still take market stabilization and prevention of systematic risk as its primary objective, organically combine the tasks of market stabilization, market restoration and market construction, and focus on cultivating an open and transparent capital market that develops stably and healthily in the long run. On September 17 st, during the Third China-France High Level Economic and Financial Dialogue, the Sino-French Forum on Asset Management was successfully held in Beijing. This forum was jointly held by the CSRC, the French Financial Markets Authority (AMF), the Asset Management Association of China, and the French Association of Asset Management, and was attended by close to 100 guests and delegates from Chinese and French securities regulatory agencies, industry associations and more than 20 asset management institutions. As of the end of August 2015, 4 French financial institutions have set up asset management joint ventures in China. 7 French financial institutions have obtained QFII qualification with a total approved quota of 1.975 billion USD. 4 French institutions have obtained RQFII qualification with a total approved quota of 15 billion RMB.
5. QFII, RQFII & QDII As of September 28 th, 2015, the approved quota for QFII, RQFII and QDII were USD 78.77 billion, USD 65.32 billion and USD 89.99 billion respectively. The newly approved quota for QFII and RQFII in September 2015 were USD 2.07 billion and USD 1.05 billion respectively. There was no newly approved quota for QDII. 6.Shanghai-Hong Kong Stock Connect In September 2015, the average daily quota usage percentage for Shanghai Stock Connect was 1.69%. The daily quota usage percentage on September 8 th was 34.73%, which was the peak during the period. The daily quota usage percentage on September 2 nd was -23.05%, the lowest during the period. In September 2015, the average daily quota usage percentage for Hong Kong Stock Connect was 3.41%. The daily quota usage percentage on September 7 th was 6.96%, which was the peak during the period. The daily quota usage percentage on September 14 th was 0.41%, the lowest during the period.
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