Shanghai China

History

Securities trading in Shanghai commenced in the late 1860s. The first listing of shares occurred in June 1866, coinciding with the development of favorable conditions in Shanghai’s International Settlement for the emergence of a share market. These conditions included the presence of several banks, a legal framework for joint-stock companies, and a growing interest in diversification among established trading houses, despite them remaining as partnerships.

In 1891, amid a mining shares boom, foreign entrepreneurs established the “Shanghai Sharebrokers’ Association” in Shanghai, marking China’s inaugural stock exchange. In 1904, the Association sought registration in Hong Kong under the Companies Ordinance, subsequently rebranding itself as the “Shanghai Stock Exchange.”

By the 1930s, Shanghai had become the financial hub of the Far East, facilitating the trading of stocks, debentures, government bonds, and futures for both Chinese and foreign investors. The Shanghai Stock Exchange’s operations were abruptly halted when Japanese troops occupied the Shanghai International Settlement on December 8, 1941. After the Communist revolution in 1949, the exchange briefly resumed operations in 1946 before closing again. China re-engaged with the world in 1978 after the Cultural Revolution ended and Deng Xiaoping rose to power. During the 1980s, China’s securities market developed alongside economic reforms. On November 26, 1990, the Shanghai Stock Exchange was re-established, with operations commencing on December 19 of the same year.

From 2001 to 2005, Shanghai’s market experienced a four-year downturn, resulting in a 50% reduction in market value from its peak in 2001. In April 2005, a ban on new IPOs was imposed to address the slump and facilitate the conversion of over US$200 billion, mostly in state-owned equity, into tradable shares. In 2006, the Shanghai Stock Exchange fully resumed operations as the yearlong IPO ban was lifted in May.

From 2007 to 2008, a “stock market frenzy” ensued as speculative traders flooded the market, briefly making China’s stock exchange the world’s second-largest in turnover. However, by the end of 2008, the Shanghai Composite Index experienced a record decline of 65%, primarily attributed to the impact of the global economic crisis that began in mid-2008.

In 2010, Agricultural Bank of China concluded the world’s largest IPO at that time, amounting to US$22.1 billion. In 2015, there were significant fluctuations in stock values, marked by a robust increase in early 2015 followed by a substantial 30% decline in June-July.

In 2019, the Shanghai Stock Exchange introduced the STAR Market, exclusively for technology-related firms, positioning itself as a competitor to the NASDAQ. As of 2023, the Shanghai Stock Exchange ranks as the world’s third-largest stock market by market capitalization, amounting to US$8.15 trillion.