Shenzhen Stock Exchange

Updated: 2006-10-17 14:58

Shenzhen Stock Exchange is one of China's three stock exchanges. It is based in Shenzhen, China.

The Shanghai and Shenzhen stock exchanges list more than 1,200 companies with a combined market capitalization of US$500 billion (2005) (30% of GDP), rivalling the Hong Kong Stock Exchange as Asia's second-largest stock market behind the Tokyo Stock Exchange.

Market capitalization is a problematic concept in the market. Most of the companies within this market belong to state owned enterprises (SOEs) in which the Chinese government maintains controlling interest. With regards to the SOE's, the government has viewed the stock markets has means of raising capital, but there is no current interest to privatization or selling off the state controlling interest in the SOE's. One difficulty is that were the Chinese government willing to privatize the SOE's, the flood of shares on the markets would likely lead to a sharp drop in prices.

The Shenzhen Exchange launched the blue-chip composite index in January 1995. It also directed a subsidiary, the Shenzhen Securities Information Co., to launch the Shenzhen Stock Exchange 100 Index on the first trading session of 2003, using 2002's final day of business as a benchmark.

The new index is composed of major firms such as Shenzhen Development Bank, property developer China Vanke Co Ltd and Guangdong Electric Power Co. Index components account for about 40 percent of the Shenzhen bourse's capitalization, 61 percent of the combined after-tax profits of Shenzhen-listed companies, and 43 percent of turnover.

The Shenzhen exchange will adjust the index's components every six months.

The initial public offering (IPO) activity in Shenzhen stock exchange was suspended from September 2000 as the Chinese government pondered merging its bourses into a single exchange in Shanghai and launch a Nasdaq-style second board in Shenzhen aimed at private and technology companies.


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