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Upon the arrival of the end of 2006, the Shanghai Stock Exchange (SSE) will mark its 16th birthday anniversary. With the historical change on China's securities market in 2006, the SSE has made a lot of achievements. Led by the State Council, the SSE, upon the efforts of all the market participants, has made great progress in this year under the guidance and support of the China Securities Regulatory Commission. With the success of the equity division reform, a succession of all-time high of SSE Composite Index and the rapid expansion of the market size and trading volume, the SSE has further secured the position of blue chip market of China. All this has drawn attention of the global capital market.
The year 2006 is the "Year of Reform", "Year of Blue Chips", "Year of Prosperity" and "Year of Contribution" for the SSE.
1. Year of Reform
The equity division reform, the most important task of the China's securities market since 2005, is the priority work of the SSE. Paying much attention to the reform, the SSE has exerted all its efforts to impel the reform of listed companies by various means. So far, 762 listed companies on the SSE have completed or begun the equity division reform, with their market capitalization covering 96.99% of the total of the companies which should conduct the reform. Namely, the reform has almost been completed.
2. Year of Blue Chips
By December 18, 840 companies had been listed on the SSE, with the total market capitalization of RMB6,166.2 billion, an increase of 160% compared with that at the end of 2005 or 33% of the GDP. Statistics of the World Federation of Exchange (WFE) show that by the end of this November, the total market capitalization of the SSE had ranked No.17 among all the world major exchanges. The rapidly growing market refers to not only the increase of the market capitalization but also the launch of a number of super large-scale blue-chip companies on the SSE, represented by BOC and ICBC, which largely enhances the market investment value. The Shanghai securities market has become a real blue chip one.
3. Year of Prosperity
On December 18, the SSE Composite Index reached the record high of 2335.23 points. This is the result of China's economic growth, but also the accomplishment after a series of reform measures on China's securities market in recent years. With the rise of the SSE Composite Index, more than 30 million investors have resumed their confidence in investment. By December 18, the accumulative stock trading volume of RMB5,300 billion on the SSE this year had ranked No.15 among the international stock exchanges, with the year-on-year increase of 173% ranking No.1. It is exciting that with the index rise and active trading, the listed companies' performance saw a continuous growth. In the first three quarters of 2006, such indicators as the major business income and net profit, have all reached the all-time high. All this has obviously improved the market quality.
4. Year of Contribution
In 2006, the Shanghai securities market has made outstanding contribution to the state-owned enterprises' reform and national economy construction. Under the favorable market environment, a number of large-scale state-owned enterprises, especially the state-owned commercial banks, have been listed on the SSE. This has greatly promoted the reforms of the state-owned enterprises' system and the financial system. Meanwhile, the effectively improved capital raising function of the SSE has also made contribution to China's economic growth. By the end of November, the funds raised by the SSE through stock issuance in this year had reached RMB139.2 billion. The RMB104.4 billion funds raised from IPO had ranked No.9 among the international exchanges and No.2 in Asia. All this indicates that the Shanghai securities market has played an important role in the national economy.
At the end of 2006, with the arrival of the 16th birthday anniversary of the SSE, China's securities market is facing a new historic opportunity for further development. After the preliminary settlement of the long-standing market structure problem, China's securities market, with a foundation for rapid development, has faced the challenges of sustainable development and further opening up. The previous accomplishments, the beginning for a long march, are only the new start for further achievements. To promote its construction and market development based on this new starting point, the SSE will take active measures in the following aspects.
Firstly, great efforts will be made to promote the blue chip market for further optimization and development of the listed companies. High-quality and large-scale enterprises are the vital drive force for the rapid development of the capital market. Thus, the SSE, to attract the listings of backbone enterprises of the national economy on the Shanghai securities market as well as create conditions for return of red chips and H share companies to the domestic market, will continue to develop the blue chip market. Meanwhile, to propel the overall listing pace of domestic companies, the SSE will take active measures to create more favorable systems and market environment for listed companies' merger, acquisition and reorganization. All this will impel further optimization and development of the current listed companies.
Secondly, further efforts will be made to strengthen the market supervision to create a fair and transparent market environment. The exchange, as the front line regulator of securities market, plays an important role in the supervision system. In recent years, the SSE, paying much attention to the market supervision, has established an advanced real-time supervision system for the operation of the securities market. By doing so, it has cracked down various violations of laws and regulations such as the insider dealing and market manipulation. To further strengthen the supervision, the SSE will introduce the 3rd Generation Market Supervision System next year. The system, with much stronger technical capacity for front line supervision, will guarantee the fairness, justness and sustainable development of the market.
Thirdly, active efforts will be made to promote innovation to provide investors with more investment breeds. Taking the financial innovation as the breakthrough, the SSE has provided more and better investment tools for the market participants by introduction of innovative financial products. In these years, the SSE has achieved a lot in the successive introductions of the ETF, the treasury bonds buy-out repo and the warrants. With continuous promotion of current products, it will develop more new products to impel the innovation of the whole capital market. In terms of trading mechanism innovation, to meet the development of the securities market after the equity division reform, the SSE has successively introduced three mechanisms in 2006, including market order, public trading information and order price control. All this has improved the trading efficiency and the market transparency. Furthermore, the SSE will soon complete all the preparation work for the New Generation Trading System, which will be officially launched, in due time, in the first quarter of 2007. The powerful trading system, which can compete with those on global mainstream securities markets in terms of function, will have a profound impact on the technical progress of China's securities market.
Fourthly, solid efforts will be made to enhance the service work to improve the service level. The SSE, paying much attention to the service work, has been endeavoring to provide high-quality service for various market members. In 2006, the SSE's service mainly covers listed companies, member companies and public investors. More than 40 special services facilitate the market. Moreover, the SSE has also conducted the "Questionnaire Survey on Satisfaction to Service in 2006", with a good result of over 80 advice and suggestions from all parties on the market. Later, in the activity of "Review of the Satisfaction Survey" for overall implementation of all the advice and suggestions, the SSE has put forward feasible rectification measures in some weak aspects. To solve such problems as the investors' consultation and low hotline-answering rate, the SSE has introduced to the public the "public consultation service hotline (4008888400)". By reinforcing management, it has greatly improved the answering rate and the voice quality. The SSE believes that it is its responsibility to provide the market with a better service. Therefore, it will further improve its service level to create a much better market environment for the development of China's securities market.
Fifthly, efforts will be made to further open up to the outside so as to propel the exchange to the international arena. The SSE believes that, as a nation needs to learn from others for its prosperity, an exchange needs a global strategic vision to rank among the tops. Under the globalization of the capital market, the SSE has continued to strengthen exchanges and cooperation with foreign countries. Through expanding business and cultivating advantages in competition, it has made substantial achievements in the internationalization strategy. This year, the SSE has signed the Memorandums of Understanding (MOU) on cooperation with Euronext, NASDAQ Stock Market, Luxembourg Stock Exchange and Montreal Stock Exchange. So far, the SSE has signed the MOU on cooperation with 27 foreign exchanges, including the top 10 international exchanges in terms of market capitalization. Based on the agreements, the SSE will carry out in-depth cooperation with these exchanges so as to pave the way for various businesses. On October 16, on the 46th anniversary meeting of the WFE, the SSE was elected Director upon secret ballot by the general meeting. The successful election of the SSE indicates that the achievements of China's securities market have won full recognition by the international market and exchanges. All this has played an active role in the internationalization of the SSE, making China more influential on the global capital market. Looking back on the history, the achievements of China's securities market, hard-won in the past 16 years, should be cherished. However, to reach a new peak, a broad vision is a must. Today's achievement is only a new start, and more efforts should be exerted. It is believed that, with the deepening of the reform and the expansion of the market size, the SSE will see more rapid development toward an internationalized blue chip market, boasting an improved system, various products, fairer operation and more advanced technology. By creating a good market environment for domestic and overseas investors, financers and intermediaries, the SSE will propel further development of China's capital market and make more contributions to the sustainable and healthy development of China's economy.
