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Why Did the SSE Composite Index Fall?

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SSE Composite Index fell

The SSE (Shanghai Stock Exchange) Composite Index fell by 3.9% for the week ending April 22, 2016. It ended at 2,959.24 on April 22, 2016. Investors feared that the government might roll back the fiscal stimulus. Recent economic data painted an improved picture of the Chinese economy. Ma Jun, research bureau chief economist at the People’s Bank of China, cautioned of more monetary policy loosening after a sharp rise in corporate debt and the risk of rising inflation.

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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. They’re only available to local investors. On the other hand, B-shares are shares denominated in foreign currency such as in US dollars on the SSE and in Hong Kong dollars on the Shenzhen Stock Exchange. They’re available to foreign investors.

Deal-making

Shares of state-owned China Eastern Airlines (CEA) rose after it announced a partnership deal with Ctrip.com International (CTRP).

In another development, Opera Software—a Norwegian online browser and advertising firm—is the target for a takeover. It might be bought by a Chinese consortium of Internet firms including companies like Qihoo 360 Technology (QIHU) and Beijing Kunlun Tech Company for an estimated acquisition price of $1.28 billion.

Return of China-focused mutual funds

The Neuberger Berman Greater China Equity Fund – Class A (NCEAX) fell by 1.9% for the week ending April 22.

Meanwhile, the Matthews China Fund – Investor Class (MCHFX), the Guinness Atkinson China and Hong Kong Fund (ICHKX), the Oberweis China Opportunities Fund (OBCHX), and the John Hancock Greater China Opportunities Fund – Class A (JCOAX) fell by 1.7%, 1.4%, 1.2%, and 1.0%, respectively.

For the same period, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) and the iShares MSCI China ETF (MCHI) fell by 3.5% and 0.4%, respectively.

American depositary receipts of Chinese companies such as Alibaba Group Holdings (BABA) rose by 1.2%. JD.Com (JD), Net Ease (NTES), and 58.com (WUBA) fell by 5.3%, 3.8%, and 2.7%, respectively, for the week ending April 22.

In the next part, we’ll look at why George Soros warns of a credit crisis in China.

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