SSE Composite Index fell
The Shanghai Stock Exchange (or SSE) Composite Index fell by 3.1% from November 25 to December 2, and ended at 3,536.9 points on December 2, 2015. This occurred as an investigation by the China Securities Regulatory Commission (or CSRC) widened for violating securities regulation.
The SSE Composite Index includes all listed stocks (A shares and B shares) at the Shanghai and Shenzhen Stock Exchanges. A-shares are shares denominated in domestic currency, the renminbi in this case, and are available only to local investors. On the other hand, B-shares are shares denominated in foreign currency such as in US dollars on the Shanghai Stock Exchange, and in Hong Kong dollars on the Shenzhen Stock Exchange, and are available to foreign investors.
Investigation by CSRC widens
Haitong Securities Company Limited’s chairperson, Wang Kaiguo, is currently under investigation by the CSRC for alleged violations of securities regulations. Haitong Securities was fined 86 million yuan ($13.4 million) by the regulator for violating securities rules, in September.
China’s other large broking houses, including Citic Securities, Guosen Securities, and Guotai Junan Securities, were also under investigation by the CSRC for the possible violation of securities regulations. It’s also speculated that these brokers may be involved in the financial irregularities that led to China’s equity market crash in June 2015. With this investigation, Chinese regulators are demonstrating their efforts to combat corruption in the financial sector.
IMF finally approves the yuan’s inclusion in SDR
The International Monetary Fund (or IMF) agreed to include the yuan, also known as the renminbi, in the Special Drawing Rights (or SDR) currency basket. This opens the door to a large inflow of US dollars to the Chinese economy in the medium to long term. The inclusion of the yuan in the SDR basket shows that the Chinese economy has developed over a period and that reforms are taking place in China.
The yuan will be the fifth currency in the SDR basket along with the US dollar, the euro, the British pound, and the Japanese yen. The yuan will have a 10.9% weight in the currency basket, and its inclusion will come into effect next October.
Returns on China-focused mutual funds
From November 25 to December 2, 2015, the Neuberger Berman Greater China Equity Fund – Class A posted the highest return of 0.9%, followed by the Oberweis China Opportunities Fund (OBCHX) with a 0.5% return.
The Guinness Atkinson China and Hong Kong Fund (ICHKX) was the worst performer with the highest negative return of 2.1% for the same period. The returns of the AllianzGI China Equity Fund – Class A (ALQAX) and the RS China Fund – Class A (RSCHX) fell by 1.6% and 1.2%, respectively.
Similarly, the ADR (American depositary receipts) returns of Chinese tech giants such as 58.com (WUBA), JD.com (JD) Alibaba (BABA), Youku Tudou (YOKU) were up by 9.3%, 6.5%, 4.0%, and 0.2%, respectively.
In the next article, we’ll analyze China’s official manufacturing purchasing managers’ index.