What are ‘A-Shares’
A-shares is an expression designating shares that trade on the two Chinese stock exchanges, that is, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are shares of mainland China-based companies and were historically only available for purchase by mainland citizens since foreign investment was restricted. Since 2003, select foreign institutions are allowed to purchase them through a program called the Qualified Foreign Institutional Investor (QFII) system.
Explaining ‘A-Shares’
A-shares are defined in opposition to B-shares. B-shares are quoted in foreign currencies (such as the U.S. dollar) and are open to both domestic and foreign investment, although they are difficult to access for most Chinese investors, most notably for currency exchange reasons. A-shares, on the other hand, are only quoted in Chinese renminbi. Some companies have their stock listed on both the A-shares and B-shares market. Due to the limited access of Chinese investors to B-shares, stock of the same company often trades at much higher valuations on the A-shares market than on the B-shares market.
Performance of A-shares
The key performance index for A-shares is published by the Shanghai Stock Exchange and is called the SSE 180 Index. To compose the index, the exchange selects 180 stocks listed on SSE. To ensure adequate representation, the selection is diversified between sector, size and liquidity. Thus, the index’s performance benchmark reflects the overall situation and operation of the Shanghai securities market.
Future of A-shares on the World’s Markets
As China grows from an emergent market to attempt to become one of the advanced economies of the world, there is a tremendous amount of demand for Chinese equity. Regulators at the stock exchanges continue the ongoing process of attempting to make A-shares more broadly available to foreign investments and having them recognized by the world’s investors.
Further Reading
- Can environmental management improve financial performance: An empirical study of A-shares listed companies in China – www.sciencedirect.com [PDF]
- The information environment of China's A and B shares: Can we make sense of the numbers? – www.sciencedirect.com [PDF]
- On the convergence of the Chinese and Hong Kong stock markets: a cointegration analysis of the A and H shares – www.tandfonline.com [PDF]
- Is US economic policy uncertainty priced in China's A-shares market? Evidence from market, industry, and individual stocks – www.sciencedirect.com [PDF]
- Location of trade, ownership restrictions, and market illiquidity: Examining Chinese A-and H-shares – www.sciencedirect.com [PDF]
- A threat to dual-class shares – www.law.harvard.edu [PDF]
- Market segmentation and price differentials between A shares and H shares in the Chinese stock markets – www.sciencedirect.com [PDF]
- A Research on the Environment Information Disclosure of China Listed Companies: A Case Study of the Listed Manufacturing Industry of A-Shares Firms during the … – en.cnki.com.cn [PDF]
- Behavioral finance in Asia – www.sciencedirect.com [PDF]
- Value relevance of earnings in an emerging capital market: the case of A‐shares in China – onlinelibrary.wiley.com [PDF]
