The buoyant China stock market has become the world's sixth largest - displacing Hong Kong - after mainland shares extended their spectacular gains in the past month.The combined market capitalization of the Shanghai and Shenzhen bourses, including A shares and B shares, reached 13.95 trillion yuan (HK$14.106 trillion) Tuesday after the Shanghai Composite Index and the Shenzhen Composite Index surged 28.74 percent and 66.85 percent year-to-date, respectively.
After the benchmark Hang Seng Index jumped another 138 points Tuesday, Hong Kong's bourse had market capitalization of HK$13.9666 trillion.
China's 56 percent leap in market cap from 8.94 trillion yuan at year-end 2006 to Tuesday's 13.95 trillion yuan knocked the SAR from sixth to seventh in global stock market rankings.
But market watchers say it is not a fair comparison to make between the mainland and the Hong Kong market.
"The mainland market includes all the nontradable shares in the calculations of market capitalization, swelling the numbers," said BOCI research vice president Peter Pak Ngan. "[Hong Kong's] H shares only take into account the freefloated shares."
Ngan said the China market is unique in the way it has tradable and nontradable shares. As both categories are included in the the market cap in China, the base for calculations is very different from other markets.
"It is just a matter of time for China's market capitalization to be consistently and significantl
y higher than that of Hong Kong," said Steven Sun Yu, regional equity strategist at Hongkong and Shanghai Banking Corp.The mainland market could even move up to the top three in global rankings in the long term, Sun said.
As at January 31, Hong Kong was ranked sixth internationally with market cap of US$1.71 trillion, according to statistics from the World Federation of Exchanges.
The New York Stock Exchange has by far the world's largest market capitalization at US$15.55 trillion (HK$121.29 trillion), followed by the Tokyo Stock Exchange at US$4.65 trillion, New York's technology-heavy Nasdaq bourse at US$3.95 trillion and the London Stock Exchange at US$3.76 trillion.
The combined market value of Shanghai and Shenzhen was about US$1.362 trillion as at January 31, ranking it ninth, one notch below Germany at US$1.66 trillion. Since the market caps of Hong Kong and Toronto (US$1.68 trillion) are very close and the ranking of these two bourses may switch month by month, after the mainland market grabbed the No6 ranking, the local exchange may need to step up expansion in order to maintain seventh spot.
But Pak said the China market will grow faster than Hong Kong's bourse going forward, as an increasing number of H-share-listed mainland enterprises plan to go back and float A shares.
