China’s stock market has been roaring in the last several months, as investors search for yield. Anecdotes abound of friends and family making impressively large gains. Television news anchors are buzzing with market updates. University students are trading stocks using their parents’ money, with little knowledge about how the stock market works. Does all of this mean that China’s stock market has arrived in the big leagues?
First, some facts. The Chinese stock market is the second largest in the world by equity value. The Shanghai Composite Index last week closed above 5,000 for the first time since 2008. Companies primarily listed in China were valued at the close on Friday at $9.7 trillion. The Shanghai-Hong Kong Stock Connect has created additional trading opportunities with funds soon to be added to sales of cross border shares, and a Shenzhen-Hong Kong Stock connect is expected open at the end of 2015.
Meanwhile, Chinese A- shares may soon be listed in MSCI index. The decision is to be made on June 9, and this would integrate locally traded shares into world financial markets. If Chinese shares are allowed to join this index, they would be incorporated into the MSCI China Index, Asian Indexes, and the MSCI Emerging Market Index. MSCI competitor the FTSE Group has already integrated Chinese A-shares into two emerging market indexes.
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