Introduction to Shenzhen Stock Exchange (Series 2) December 5, 2016

The Small and Medium Enterprise Board (SME Board) was launched by the government on the Shenzhen Stock Exchange in May 2004. It is a sub-board of the Shenzhen Stock Exchange for the listing of small and medium-sized enterprises (SMEs). The goal is to help those SMEs with growth prospects, to have a listing on the Shenzhen Stock Exchange. With an emphasis on private firms, the SME board has become a unique and indispensable segment in China’s multi-tier capital market system.

The SME board in Shenzhen Stock Exchange (SZSE) has grown fast in the past 12 years. As of 22 Sep 2016, the SZSE SME composite increased from 1000 points to more than 11,000, while firms listed on the board has climbed from 38 to 800. The total market capitalization is CNY 9455 billion (about USD 1418 billion) and total trading value is CNY 95.8 billion (USD 14.4 billion), average P/E ratio was 49.46

Factsheets

Source: Shenzhen Stock Exchange


According to Bloomberg, investors are dumping Shanghai stocks, they shun government-run firms in favor of “new economy” stocks that dominate the SME board, as they think that the traditional sectors do not have much growth potential, while the SMEs are labelled with high growth and new future. Shenzhen’s SME Board is now the new leader after surpassing Shanghai’s trading volume on 17 May, 2016.

Factsheets2

Source: Bloomberg

The SME Board witnesses steady growth and has developed into the largest segment of Shenzhen market in terms of listed companies, market cap and turnover. SME Board-listed companies outperform those blue chips and large caps significantly when the overall market is weak.

Factsheets2

Source: Bloomberg

“More than 700 SMEs on the Shenzhen Stock Exchange’s SME Board have better profitability than those on the main board. More than 300 of them are top players in their industries. And more than 100 of them are leading players in the global markets,” said Zhao Changwen, Director General of the Department of Industrial Economy, DRC of the State Council.

For example, Zhejiang NHU (002001), the largest vitamin manufacturer in China; Suning Commerce (002024), one of the largest privately owned retailers in China, ranks among top Chinese B2C companies; Hualan Biological Engineering (002007), the leading blood products & vaccines manufacturer in China; BYD Company (002594), the most innovative independent national automobile brand and the largest supplier of rechargeable batteries in the globe; Xinjiang Goldwind Science & Tech (002202), the largest manufacturer of wind turbines in China and the world’s largest manufacturer of permanent wind turbine generator sets.

To view the full list of SME Board component stocks, please click HERE.

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About the author

Shengyu Xu
Senior Dealer
Global Markets Department

Xu Shengyu graduated from the National University of Singapore with a master degree in Chemistry and joined Phillip Securities since 2011. He is currently a Senior Dealer in the Global Markets department.

Shengyu is proficient in stock trading using both technical and fundamental analysis and frequently conducts educational seminars such as Market Outlooks, “Why Invest Globally” and trading platform introductions to enable his clients to make informed decisions in their investment.

Shengyu specialises in China and Hong Kong markets.

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