China A-Shares

What Are China A-Shares?

China A-shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Historically, China A-shares were just available for purchase by mainland residents due to China's limitations on foreign investment.

In any case, starting around 2003, select foreign institutions have been able to purchase these shares through the Qualified Foreign Institutional Investor (QFII) system. Established in 2002, the QFII program allows determined licensed international investors to buy and sell on mainland China's stock exchanges.

A-shares are also known as domestic shares because they utilize the Chinese renminbi (RMB) for valuation.

China A-Shares versus B-Shares

China A-shares are not the same as B-shares. A-shares are just quoted in RMB, while B-shares are quoted in foreign currencies, like the U.S. dollar, and are all the more widely available to foreign investors. Foreign investors may have difficulty accessing A-shares because of Chinese government regulations, and Chinese investors may have difficulty accessing B shares most notably for money exchange reasons. A few companies opt to have their stock listed on both the A-shares and B-shares market.

Due to the limited access of Chinese investors to B-shares, the stock of the same company frequently trades at a lot higher valuations on the A-shares market than on the B-shares market. Although foreign investors may now invest in A-shares, there is a month to month 20% breaking point on repatriation of funds to foreign countries.

The Shanghai Stock Exchange (SSE) publishes the key performance index for A-shares, known as the SSE 180 Index. In making the index, the exchange chooses 180 stocks listed on the SSE. The selection is diversified between sector, size, and liquidity to guarantee adequate representation. Consequently, the index's performance benchmark mirrors the overall situation and operation of the Shanghai securities market.

History of China A-Shares

Since its commencement in 1990, remembering a major reform for 2002, the index has seen great fluctuations. Nonetheless, it has developed along with the Chinese economy. The years 2015 to 2016 were a particularly troublesome period, with a 52-week performance of - 21.55% as of July 20, 2016.

As China develops from an emerging market to a advanced economy, there is substantial demand for Chinese equity. Stock exchange regulators proceed with efforts to make A-shares all the more broadly available to foreign investors and have them recognized by the global investing community.

In June 2017, the MSCI Emerging Markets Index announced a two-phase plan in which it would gradually add 222 China A large-cap stocks. In May 2018, the index began to partially incorporate China large-cap A shares, which make up 5% of the index. Full inclusion would make up 40% of the index.

It is important for countries, for example, China to open their markets to global investors to stay competitive and flourish economically. China A-shares give an alternative investment to those keen on trading in Chinese securities.

Features

• China A-shares are not quite the same as B-shares; A-shares are just quoted in RMB, while B-shares are quoted in foreign currencies, like the U.S. dollar, and are all the more widely available to foreign investors.
• Historically, China A-shares were just available for purchase by mainland residents due to China's limitations on foreign investment.
• China A-shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE).