Chinese Market Glossary: ​​Key terms to know about the Chinese economy and the recent market sell-off

Business News/ Markets / Stock Markets/ China Market Glossary: ​​Key terms to know about the Chinese economy and the recent market sell-off

2 minutes read
17 Aug 2023, 04:46 PM IST

live mint

• A Goldman Sachs report Tuesday showed all types of shares were selling, but A-shares, listed on the domestic stock exchange, led the sell-off, accounting for 60 percent of it.

Signage for Hong Kong Exchanges & Clearing Ltd. (HKEX) is exhibited at the Exchange Square complex in Hong Kong, China. Photographer: Justin Chin/Bloomberg

Amid China’s sluggish economic recovery, global hedge funds are aggressively selling Chinese stocks as concerns mount over the country’s real estate sector. This has prompted a general sell-off in China’s stock market, causing Hong Kong’s Hang Seng index to fall more than 3 percent, weighed down by basic materials and consumer discretionary stocks. The yuan fell to a 16-year low as weak market sentiment weighed on the currency index.

Amid China’s sluggish economic recovery, global hedge funds are aggressively selling Chinese stocks as concerns mount over the country’s real estate sector. This has prompted a general sell-off in China’s stock market, causing Hong Kong’s Hang Seng index to fall more than 3 percent, weighed down by basic materials and consumer discretionary stocks. The yuan fell to a 16-year low as weak market sentiment weighed on the currency index.

Subscribe to continue reading

Earlier this week, a Goldman Sachs report showed that all types of shares were selling, but A-shares, listed on the domestic stock exchange, led the sell-off, accounting for 60 percent of it. “Hedge funds have lost ground in eight of the last ten trading sessions through August 14th. Chinese stocks sold net,” the bank said, adding that its clients liquidated both their long and short positions.

This is the largest 10-day net sell-off in Chinese stocks since October 2022 and one of the largest moves in the past five years. As one of the largest providers of lending and trading services, Goldman Sachs is able to track investment trends of hedge funds through its prime brokerage unit for investors, according to a report by Reuters news agency.

Global investors have raised concerns about the Chinese economy as the confluence of recent events has clouded the country’s economic outlook. To better understand the sell-off in the Chinese market, here is a glossary of terms to know about the Chinese markets:

Beijing Stock Exchange: The exchange was launched in September 2021 in Beijing, China. It is one of the top three stock exchanges in mainland China.

PBOC: The People’s Bank of China (PBOC) is China’s central bank and is responsible for China’s monetary policy.

OEM: An original equipment manufacturer (OEM) is a company that manufactures a product to its customer’s design and desires, which is ultimately branded by its customer.

Share: A shares are shares of Chinese companies denominated in Renminbi (RMB) and traded on mainland China stock exchanges.

Red chip: Red Chip refers to the shares of mainland China-based companies that are based outside of mainland China and are listed on the Hong Kong Stock Exchange. Usually, the majority shares of the companies are directly or indirectly controlled by a government agency in mainland China.

Foreign Invested Enterprises (FIEs): Foreign-invested companies are companies registered in mainland China that are wholly or partially owned by foreign shareholders.

Shanghai Stock Exchange (SSE): The Shanghai Stock Exchange (SSE) is a stock exchange based in Shanghai, China and one of the three major stock exchanges in mainland China.

negative list: The black list refers to the foreign direct investment (FDI) black list in China, which is a special administrative measure for access to foreign investment.

It is issued and updated by the National Development and Reform Commission of the People’s Republic of China and the Ministry of Commerce of the People’s Republic of China (MOFCOM) and provides a detailed list of mainland China industries that restrict or prohibit foreign ownership.

CAS: The Chinese Accounting Standards (CAS) for Enterprises, also known as the Chinese Generally Accepted Accounting Principles (Chinese GA`), are the accounting rules used in mainland China. In general, they conform to International Financial Reporting Standards (IFRS) with some differences.

Get all the business news, market news, breaking news and breaking news updates on Live Mint. Download the Mint News app for daily market updates.

Updated August 17, 2023 4:46 PM IST