What are A-shares and how are they traded?

China A-shares or simply A-shares are the stocks that are traded in Shanghai and Shenzhen stock exchanges. They are also called domestic shares because the Chinese currency Renminbi is needed in the trades.

These shares are heavily restricted by the Chinese government and accessing them is almost impossible by foreign investors. However, the authorities have allowed some Qualified Foreign Institutional Investors (QFII) to deal in A-shares since 2003.

China A-shares and China B Shares

For the foreign investors, there are B-shares that deal in Dollars. The idea is to keep foreign investors away from getting a share in Chinese companies while also allowing competition to get a better deal in terms of investments in China.

A shares are primarily transacted using local currency, Renminbi while B shares are traded in USD. This is why the foreign investors find it difficult to trade in A-shares while Chinese investors get a jolt in terms of currency exchange to trade in B shares. Foreign Institutional Investors who want to invest in A-shares need to pay 20% repatriation fees.

History of A-shares

The Shanghai Stock Exchange (SSE) publishes the SSE Index since 1990 and it has gone through ups and downs. The SZSE and SSE deal in MCSI Index that tracks foreign investment in Chinse shares.

This change in mindset among Chinese regulators was partly due to the crisis in 2015-16 when the economy shrank 21.6%. A decision that 222 large-cap shares (the value of which is 5% of total shares) could get foreign investment was made in 2018.

The modern Chinese economy is on the rise and there is no dearth of investors in the A and B shares. The restrictions on A shares however continue for individual investors.

Points to Note

  • Chinese A-shares are traded in Shanghai and Shenzhen Stock Exchanges.

  • Chinese A-shares have been historically restricted for mainland Chinese investors. It was somewhat lifted since 2003.

  • There is an option of investing in B shares for foreign nationals in China that deals in Dollars.

Updated on: 27-Jul-2021


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