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Why Has the SSE Composite Index Risen?

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SSE Composite Index rose

The Shanghai Stock Exchange (or SSE) Composite Index rose from May 25 to June 1, 2016, and closed at 2,913.51 on June 1 after investors speculated that MSCI could include China A-shares in its Emerging Market Index at its annual review, which will be held on June 15.

According to a report from Goldman Sachs, investors are pegging the probability of inclusion at 70% compared to 50% as estimated earlier. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) rose by 3.2%, and the iShares MSCI China ETF (MCHI) rose by 1.7% from May 25 to June 1.

Last week, the Shanghai and the Shenzhen stock exchanges announced that they would tighten rules on voluntary trading suspensions. Meanwhile, gains were capped by weak manufacturing data, which indicated that China was struggling to gain traction.

The SSE Composite Index includes all listed stocks (A shares and B shares) on the Shanghai and Shenzhen Stock Exchanges. A-shares are shares denominated in domestic currency, that is, the Chinese yen. They are available only to local investors.

B-shares are shares denominated in foreign currency such as US dollars on the Shanghai Stock Exchange and in Hong Kong dollars on the Shenzhen Stock Exchange. They are available to foreign investors.

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Return on China-focused mutual funds

From May 25 to June 1, 2016, the Neuberger Berman Greater China Equity Fund Class A (NCEAX) rose by 31%.

The Templeton China World Fund (TCWAX), the John Hancock Greater China Opportunities Fund Class A (JCOAX), and the Oberweis China Opportunities Fund (OBCHX) rose by 2.9%, 2.7%, and 2.1%, respectively.

Meanwhile, the AllianzGI China Equity Fund Class A (ALQAX) rose by 1.9% in the same period.

From May 25 to June 1, American depositary receipts of Chinese companies such as JD.com (JD), Alibaba Group Holdings (BABA), and 58.com (WUBA), in which the above-mentioned funds are invested, rose by 3.5%, 1.5%, and 0.4%, respectively.

In the next article, we’ll look at China’s official manufacturing purchasing managers’ index.

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