Chinese Business Insights - How To Invest In The Chinese Stock Market by Leon Chaudhari

Chinese Business Insights Chinese Business Secrets Exposed ISSUE 2

How Can I Invest In The Chinese Stock Market? ISSUE 2: Crash after crash. The Chinese stock market is like a roller coaster ride. Many people make a fortune, many people lose their fortune. To many foreign investors, the Chinese stock market remains a mystery. In this issue, I want to give you some insights on how the Chinese stock market works and how to you can invest in it.

Nov. 15th, 2015

ISSUU Leon Chaudhari

ÂŠ Leon Chaudhari 2015. Beijing, China. All rights reserved. Published independently. State the author if you want to use parts of this paper for personal or academic use. You may distribute this paper. Follow Leon Chaudhari on Facebook or @leonchaudhari on Twitter. For the lastest updates visit leonchaudhari.com. While I am in China please contact me under leonchaudhari@yahoo.com Leon Chaudhari is the CEO & Co-Founder of TAPTAB and Publisher & Managing Partner of HowTo Magazine. He spent time studying in China and the United States of America, is about to publish several masterclasses on Business Development, Equity Management, Language Learning & Personal Development on Udemy, and regularily gives updates about developments in Chinese economy and stock market. Leon is furthermore renowned for his inventions, which won him several national and international awards, and his public speaking. TABLE OF CONTENTS Introduction To Chinese Stock Market 1. Shanghai Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Shenzhen Stock Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. SSE vs. SZSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types Of Shares & Regulations 1. A-Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. B-Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. H-Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. ChiNext . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Chinese GEM Board Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. SME Board Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. ST-Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Getting You Invested 1. How To Buy Stocks in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Personal Advice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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1. Shanghai Stock Exchange The Shanghai Stock Exchange was founded in 1891. Its main currency is Chinese RMB. In August 2012, it had a market cap of 2,4 Trillion USD. Its volume was around 0,5 Trillion USD in Dec. 2009. Since then, the volume increased exponentially. Indexes: SSE composite, SSE180, SSE50. For more information check www.sse.com.cn. 2. Shenzhen Stock Exchange The Shenzhen Stock Exchange was founded on December 1st, 1990. Its main currency is Chinese RMB. In Aug. 2010, it had a market cap of about 1 Trillion USD; And a volume of 2,7 Trillion USD. Indexes: SZSE Component Index. For more information check www.szse.cn.

3. SSE vs. SZSE

SSE

SZSE

More than 1900 companies

Large US Market Capitalization

trading hours: monday to friday

Local Time Tradng 9.15h-9.25h centralized competitive pricing

9.30h-11.30h, 13.00h-15.00h consecutive bidding

Structure of the SSE & SZSE

Type

Currency

Investors

A Shares B Shares

Renminbi (RMB) Foreign Currency

Domestic, Foreign Domestic, Foreign

Listing Requirements for SSE & SZSE 1. The company’s shares issued to the public are granted by the China Securities Regulatory Comission 2. The company’s total share capital must not be less than 30 Million RMB 3. The company’s total shares issued to the public account for 25% or more of its total shares. In SSE, if the issuer’s total share capital exceeds 400 Million RMB, the aforesaid percentage shall be 10%. 4. The company must not have comitted any serious illegal act and there has been no flaws in its financial reports in the last three years

Launch Base Day Base Value

SZSE

SSE Composite Index Jul. 15, 1991 Dec. 19, 1990 100

Composite Apr. 4, 1991 Apr. 3, 1991 100

SSE

Constituent Jan. 23, 1995 Jul. 20, 1994 1000

SZSE A-Share B-Share (In Hongkong Dollars) SME Board - Small and Middle Sized Enterprise ChiNext Board (Like NASDAQ) - High Growth, High Tech, Start-Ups -

A-Share Type B-Share

Types Of Shares & Regulations 1. A-Shares The largest number of shares in the Chinese stock market are the so called A-Shares. They are priced and traded in Chinese currency, the Renminbi (RMB). It is a paperless e-billed stock and T+1 transaction and T+3 settlement systems are implemented. The T+1 transaction system allows investors to sell at least one day after purchase (better not be a day trader J ). The T+3 settlement can be proceeded at least three days after the trading day. A-Shares have a so called 10% Price Restriction, which means that if the stocks rises or loses in value by more than 10% percent, trading has to be stopped immediately and must be restarted on another day. A-Shares are available in both SSE and SZSE. But, they are only open for domestic and foreign investors under QFII program. 2. B-Shares B-Shares are similar to A-Shares but traded in RMB and USD in SSE. And in HKD (Hongkong Dollar) in SZSE. As well as A-Shares, B-Shares are paperless e-billed stocks which implement T+1 transaction, the T+3 settlement system and have a 10% Price Restriction. They are as well available in SSE and SZSE. Since 2001, they are open for both domestic and foreign investors. 3. H-Shares H-Shares are foreign stocks registered in mainland China, while are listed in Hongkong’s stock market. They are physical stocks, no paperless e-billed stocks. They implement the so called T+0 transaction system and have no pricing restrictions (so they may rise or fall more than 10%). Hshares are open to foreign investors and China domestic institutional investors. 4. ChiNext (Chinese GEM board) GEM stands for Growth Enterprises Market and is worldwide famous for the success of NASDAQ. It is a NASDAQ-type exchange for high-growth and start-ups (mostly tech start-ups). It is only available on SZSE and is only open to domestic investors. 5. Chinese GEM board share The Chinese GEM board share is a high-risk, high return share and is billed electronically (paperless e-billed stock). It implements T+1, T+3, and 10% Price Restriction. Here are some rules for Chinese GEM board shares on IPO day: 1. rises or falls 20%, stop trading for 30 minutes 2. à restart, rises or falls by 50%, stop 30 minutes 3. à re-start, rises or falls 80%, stop until next trading day 6. SME board share SME stands for “small middle enterprise”. SME board shares are for small and middle sized companies. They are only available on SZSE and only to domestic investors. Relatively high risk, high return. 7. ST-Stock ST stands for “special treatment”. Believe me, you don’t want to invest in ST shares, as long as you don’t short. These shares are marked with ST because they have financial problems or are in an abnormal condition. These shares still appear on all stock boards. They often include high risk but may offer a high return. Here, the 10% Price Restriction changes to 5% Price Restriction.

Getting You Invested 1. How To Invest In The Chinese Stock Market STEP 1: Opening A Trading Account Open a trading account that is suitable for you with your broker. Inform yourself about a trading software that fits your needs and change it the way you want it to be. The companies offering trading software, often as well offer seminars to make potential customers understand how their software works. Use this opportunity. It will later pay off. NOTE: You can online invest in B-Share stocks. STEP 2: Temporary Residency Visa Get A temporary residency visa or Hongkong or Macau. STEP 3: Brokerage For Hong Kong Stock Exchange Open an account with a suitable brokerage that does business on the Hong Kong Stock Exchange. STEP 4: Individual or Joint Investor Form/ Debit Authorization Form Download and complete either the individual or Joint Investor Form, as well as the Debit Authorization Form. STEP 5: Transfering Funds Transfer funds from your home bank account to your Hong Kong account. Now, you are ready to go! 2. Personal Advice Be aware of the fact that the Chinese government still regulates the stock market. At some point it will be like gambling but if you stay open minded and look for the right niches, you can make your fortune in China. Manage risk properly and get informed about the lastest news in government and Chinese politics. Also look for a reliable news agency to support you with efficient data. Even though it might seem very complex on the first glimpse, you will later be surprised about how westerstyled Chinese stock exchanges work.

Thanks for reading!