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To understand a stock market, one must begin from its listed companies, and look at what kind of businesses they are conducting, how competitive they are, as well as their financial status such as profitability and gearing.

Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) are the two exchanges in Mainland, which have about 3,000 listed companies. These companies are involved with various industries in Mainland, some of which are not covered by Hong Kong stock market.

Facts about the Shanghai and Shenzhen stock markets (as at end September 2016)

 Shanghai A-sharesShenzhen A-sharesHong Kong
No. of listed companies 1,126 1,807 1,687 (Main Board)
Boards Single board Main Board, SME Board, ChiNext Board Main Board, GEM Board
Market cap.
(Billion HKD)
30,741.2 25,366.4 25,317.5 (Main Board)
Average market cap per company
(Billion HKD)
27.3 14 15 (Main Board)
Average daily turnover (Billion HKD) 229.1 377.3 67 (Main Board)
Average P/E ratio (Times) 15 42 11 (Main Board)
62 (GEM Board)
Turnover rate (%) 144% - 254% 277% - 479% 35% - 50%

Source: Websites of HKEX, SSE, SZSE and World Federation of Exchanges. On 30 September 2016, the exchange rate of RMB to HKD was 1: 1.16148

Industry

At present, there are about 400 China-associated stocks listed in Hong Kong as H-shares or red-chip stocks. These stocks are mainly involved in the local industries such as financial services, real estate, telecommunications and telecommunication equipment, resources and energy, infrastructure, shipping and transport as well as food and beverage in China. Industries sectors covered in Shanghai and Shenzhen stock markets are similar to those in Hong Kong, but with more choices of stocks available. In addition, Shanghai and Shenzhen stock markets also comprise sectors that are relatively rare in the Hong Kong stock market.

Companies listed on SSE are usually sizeable enterprises, many of which are state-owned. Financial services, real estate, resources and energy, as well as infrastructures are the main industries of Shanghai stocks. The SZSE, on the other hand, is made up of a bigger portion of small and medium-sized enterprises and private companies, many of which are from high technology industry. They can bring investors opportunities in emerging sectors such as mobile gaming, live streaming, etc.

Indices

Investors can understand more about the overall performance of the stock markets or individual industries through benchmark indices. The CSI 300 Index, the SSE Composite Index, the SSE 180 Index, the SSE 380 Index, and the SZSE Component Index are all common indices that reflect the performance of the Shanghai and Shenzhen stock markets.

 

Investors

The Mainland stock markets are mainly dominated by retail investors, while the Hong Kong stock market is dominated by institutional investors. "Speculation in initial public offerings, small cap and non-performing companies" are common among Mainland investors. Since Mainland investors tend to speculate on news and rumours, the Mainland stock market is relatively volatile.