SZSE Financial Innovation Laboratory has recently released 2012 Stock Market Performance Report. The report offers a detailed and complete presentation on the operational efficiency and quality of Shenzhen securities market in terms of liquidity, volatility, effectiveness and quality of order execution. The report provides significant empirical ground for improving the market performance and maintaining sound development of the market.
As indicated in the report, SZSE recorded sound market performance in 2012, with favorable liquidity, continuous declines in volatility, stable operation, heightened effectiveness and order execution.
First of all, liquidity remained at favorable levels with impact cost (per unit of CNY100 thousand) at 19.5 basis points and liquidity index (per unit of 1%) at CNY1.77 million. The Main Board, SME Board and ChiNext Market also witnessed sound liquidity levels with their impact cost (per unit of CNY100 thousand) at 18.1, 19.1 and 22.2 basis points respectively.
Secondly, the market volatility continued to decline, and operational stability was further enhanced. Return to volatility and short-interval volatility ratios were recorded as 43 and 40 base points respectively, lower than those in 2011(45 and 41 basis points correspondingly). Return to volatility ratios of the Main Board, SME Board, ChiNext Market were 42, 43, 46 basis points respectively.
Thirdly, market effectiveness remained at a high level. The market efficiency coefficient (MEC) was 0.90, close to the random walk. The MEC of three boards are very close, with the price effectiveness of the Main Board (0.896), SME Board (0.904) and ChiNext Market (0.902) all recording relatively high levels.
Fourthly, the market recorded stable and efficient order execution. Calculated in shares, 35% of orders received best execution, 33% were executed within 10 seconds after submission and 93% were executed at a single quote. The average execution time for market-to-limit orders and other orders (the time span from the order submitted to execution completed) were 44 and 835 seconds.
Currently, China’s securities market is undergoing a phase of innovation and development. Dynamic product and business innovation bring new opportunities and vitality to the market. Regular market performance reports not only facilitate targeted product and systemic innovation of the securities market, but also support policy-making with empirical references. The report also offers a guideline for the exchange to further improve market performance.
SZSE recorded improvement in institutional development, trading mechanism reform, financial innovation and trading system upgrades. These efforts have laid a solid foundation for future financial innovation. The indicators also demonstrate that SZSE is headed towards higher liquidity, faster execution and lower trading cost. SZSE will energetically carry out works regarding deepening the liquidity, improving the trading system, enhancing the quality of information disclosure, constantly advance the market performance and provide a highly efficient and low-cost market for investors.