Comparative Study On Stock Market Between Mainland And Hong Kong

As a part of capital market, the stock market plays an important role in allocating funds and resources to productive use in the economy. At present, the stock market in Mainland is far from the goal of an efficient stock market. How to reach the goal is not only the concern in the academic society but also a policy issue in China.The stock market in Hong Kong when formal trading began has more than one hundred years history since 1891, and that of Mainland is just 20 years. I believe that both the experience of and lessons from the development of Hong Kong stock market are useful to improve the stock market in Mainland.This thesis discusses "Comparative study on stock market between Mainland and Hong Kong". The purpose of this study is to find the problems of the two stock markets and to give some feasible suggestions. The structure of this paper is as follows: In the first part I introduce some theories that give us a better understanding of the stock market in general. There are 4 parts to the theories: principles of stock investment, approach of portfolio choice, approach of asset pricing and the characteristics of the Stock Market in China.In the second part, I analyze the differences between Mainland and Hong Kong stock market, which composed by two Shanghai stock market and Shenzhen stock market for Mainland, purpose A shares held by Chinese public, denominated and payable in Chinese currency, they also have B shares denominate in Chinese currency and payable in foreign currency are designed for foreign investors. In 1993 an accord of cooperation between Mainland and Hong Kong was issued to create a new H shares that is floated and listed on the Hong Kong exchange. But the clue of this work is the comparison between the two markets, the requirements about listed company, Chinese investor's behavior, stock market mechanism and regulations.Most of all, In Chapter III of the second part, I point out the issues in Mainland stock market, including concentrated share ownership, considerable non-tradable shares, the role of the state, a compromised regulator, absence of effective incentive mechanisms for management, Lack of screening for IPO selection and the underdeveloped capital market. In order to deal with these issues and to a more efficient stock market, I find out some useful experience of the Hong Kong stock market: (i) relative strength of the financial sectors; (ii) the presence of both competition and cooperation in the financial sector has made it possible to regulate effectively through the Banking Ordinances and Listing Rules and Takeover Codes; (iii) the insolvency and bankruptcy procedures are relatively straightforward; (iv) increasing the emphasis on accounting and auditing standards improvements will make monitoring;(v) kept through reputation and other rational mechanisms.A third part is necessary to simulate a case study, which result some findings from these cases.This thesis ends with a conclusion of my research findings.