CHINA'S STOCK MARKET TRENDS AND THEIR DETERMINANTS ANALYSIS USING MARKET INDICES

Abstract

Purpose. To analyze which macroeconomic factors influence China’s stock market and what are the trends of the China’s stock market indices.

Methodology. Market indices are used in China’s stock market trends analysis. Indices are analyzed in 2008–2012 period. Market return is expressed as the change of index. Market risk is analyzed using standard deviation value. Correlation is used in order to identify the relationship between indices of the different regions.

Results. Before the start of global financial crisis trends of China market indices and other markets indices were almost the same. But after the recovery of the indices in 2009, China’s stock market trends started to differ from global market trends. Correlation analysis of China’s and U.S. indices showed that the correlation between China’s and U.S. indices is very weak, indicating that the Chinese market and the U.S. market dynamics are not related to each other.

The relationship between China’s stock market, inflation and GDP was observed. Despite the high growth of China's GDP China's stock market did not reach good results over the last few years. The index had a negative return.

Practical implications. From the analysed data investors can see the trends of China stock market. Investors can decide whether China stock market is more attractive than other regions for them or not.

Value/originality. Due to the low China’s stock market integrity we can assume that China’s stock market may be little affected by the processes of globalization and can develop isolated from the global markets. In order to find out whereas China’s stock market is isolated from other world’s markets we analyze the tendencies of market return and risk and the relations between China’s stock market and other markets.

DOI: http://dx.doi.org/10.5755/j01.em.18.4.5096