What Are China A-Shares?

The Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) trade mainland China-based corporations’ A-shares. Due to China’s investment limitations, mainland individuals could only buy A-shares.

Since 2003, QFII-qualified foreign institutions may buy these shares. The 2002 QFII program lets approved overseas investors trade on mainland China’s stock markets.

A-shares are domestic since they are valued in RMB.

KEY TAKEAWAYS

• The Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) trade mainland China-based corporations’ A-shares.
• Due to China’s investment limitations, mainland individuals could only buy A-shares.
• China A-shares are solely offered in RMB, whereas B-shares are quoted in international currencies like the U.S. dollar and are more accessible to overseas investors.

China A-Shares vs. B-Shares

A-shares in China operate differently from B-shares. Unlike B shares, listed in foreign currencies like the U.S. dollar, A shares are exclusively quoted in RMB, limiting their accessibility to overseas investors. Because of Chinese government rules, foreign investors may have trouble accessing A-shares. In contrast, Chinese investors may have trouble accessing B-shares due to currency exchange issues. It is a choice made by certain businesses to list their shares on both the A-shares and B-shares markets.

A stock of the same firm may typically trade at substantially higher values on the A-shares market than on the B-shares market due to the restricted access of Chinese investors to B-shares. A-shares are now open to international investment, although only 20% of monthly profits may be taken out of the country.

The Shanghai Stock Exchange (SSE) releases the SSE 180 Index, the primary performance index for A-shares. The SSE chooses 180 representative equities from those traded there to make up the index. All relevant industries, sizes, and liquidity levels have been considered in the selection process. As a result, the index serves as a standard for measuring performance that accurately represents the condition and activity of the Shanghai stock exchange.

History of China A-Shares

There have been significant shifts in the index since its introduction in 1990 and subsequent substantial modification in 2002. However, it has expanded in tandem with China’s economic growth. As of July 20, 2016, the 52-week performance was -21.55%, reflecting a rough period spanning 2015 and 2016.

China’s stock is in high demand as the country transitions from an emerging market to an advanced economy. The authorities in charge of the stock market keep working to increase the accessibility of A-shares to overseas investors and get international recognition.

The MSCI Emerging Markets Index stated in June 2017 that it would include 222 China A large-cap companies throughout two phases. As of May 2018, 5% of the index comprises Chinese large-cap A shares. With complete inclusion, the index would be higher by 20%.

To maintain economic competitiveness and growth, nations like China must open their markets to foreign investment. If you want to invest in Chinese stocks, consider purchasing China A-shares.