From the beginning of the first public company on the Shanghai Stock Exchange in 1990, the stock market has experienced a quickly addition during these twenty old ages in china.Up to the twelvemonth of 2008, there were about 1650 public companies on either Shanghai Stock Exchange or Shengzheng Stock Exchange with the entire market capitalisation of 121366 ( 100 million kwai ) .The relationship between macroeconomic variables and market monetary values has been widely recognised by economic experts, they have made a batch of researches in this field, though the manner to place their bearings are vary from individual to person.Some of them use merely one of macroeconomic variables like Comoncioli ( 1995 ) who focuses on the relationship between stock market index and Gross Domestic Product ( GDP ) , Pearce and Roley ( 1983 ) survey on the PPI ( manufacturer monetary value index ) , and Lee ( 1992 ) emphasizes on the Interest Rate.Some prefer to unite different sorts of macroeconomic variables for analysize.Abdullah and Hayworth ( 1993 ) utilize seven macroeconomic variables ( viz. , money spply, rising prices, short and long-run involvement rates, budget, trade and the growing of industry ) to analyze their relationship between stock market prices.Tursoy, Gunsel and Rjoub ( 2008 ) adopt more than 10 macroeconomic variables for research.In this mini essay, the first portion is the debut of some comparative background, including the state of affairs of stock market in China and the privious researches of other learners.Next to this, it begins to analyze the relationship between each macroeconomic variables and stock market monetary values harmonizing to the elaborate statistics in china.The last portion is to pull some decisions.
Since the differennt research intents, the choice of proper and relevant macroeconomic variales are different.Dritsaki ( 2005 ) thinks that choosing macroeconomic variables should concentrate on those objects which reflect both economic and fiscal state of affairs of one state. Therefore, variables like GDP, CPI, Money Suppley, Exchange Rate, Interest Rate are applyed in this essay, for there are more likely valuable in following the relationship betwwen macroeconomic variables and stock market monetary values based on the particular state of affairs in China.
On the long tally, the fluctation of stock market monetary values and the changement of GDP shows a positive relationship, except the twelvemonth of 2007.As we are known, GDP is a sort of assorted index, which reflects the strength of a state ‘s overall macro-economic indexs. When there is a diminution in the economic downswing, the bulk of the public companies are more likely to cut down their investing and costs, therefore, the stock market ‘s supply will travel easy ; at the same clip, due to economic downswing and lower expection and future income, investors, thereby cut downing capital outgo and investing, .Consequentaly, stock monetary values is bound to fall down. Conversely, when a countryaa‚¬a„? GDP grews quickly, the trumpeter of economic chances, outlooks about the future betterment of concern assurance in future development, are acute to enlarge the graduated table of extra investing and the demand for capital enlargement, therefore excite the stock market and increase its whole value.
Consumer Price Index & A ; Entire Market Capitalization
Year
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
TMC
1048
3531
3691
3474
9842
17529
19506
26471
48091
43522
38328
42457.72
37055.57
32430.28
89403
327141
121366
Consumer price index
106.4
114.7
124.1
117.1
108.3
102.8
99.2
98.6
100.4
100.7
99.2
101.2
103.9
101.8
101.5
104.8
105.9
Note: TMC=Total Market Capitalization ( 100 Million Yuan )
CPI= Concumer Price Index ( premise the last twelvemonth is 100 )
As can be shown from the tabular array, the CPI fluctuated in a narrow degree, while the TMC saw an addition tendency on the whole.It is widely recognize that the measuring of Inflation Rate is based on the CPI.In theory, Inflation Rate non merely straight affect people ‘s current decision-making, but besides induce their rising prices outlooks. In times of rising prices, currency depreciation inspired by rising prices outlooks ever prompt the persons to interchange the currency with trade good for the intent of hedge, one of the hedge tools is stock, therefore spread outing the demand for portions ; on the other manus, when rising prices has grown to a degree, the Government frequently carry out a tight financial and pecuniary policies to suppress its development, so, the involvement rates is in rise. At that minute, one of the best options of public company to raise financess is to publish stock, which leting a corresponding addition in the supply of the stock market. At this point, if the stock market growing in demand is greater than supply growing, the stock monetary value and rising prices showed a positive relationship, or if the stock market growing in demand is less than supply growing, the stock monetary value and rising prices shows negative correlativity.
From the saloon chart, though the money supply shows a steady increasing pace, the TMS seems non ever maintain gait with it, this might due to the particular state of affairs in china.In theory, Money supply on stock market monetary values can be achieved through three sorts of effects: ( 1 ) Expected effects. When the cardinal bank program to implement expansionary pecuniary policy, it can act upon the market participants expect the currency market for the hereafter, therefore altering the stock of money supply and impact the monetary value and size of the stock market ; ( 2 ) the portfolio consequence. When the cardinal Bankss carry a easing pecuniary policy, currency held by the people increased, while the fringy public-service corporation of money ( investing income ) is diminishing in the other conditions remain unchanged, people held money would transcend the demands of day-to-day minutess, This would, of class, consequence in some money inundation into the stock market, and the stock market monetary values is in rise undoubtly ; ( 3 ) the growing consequence of the intrinsic value of the stock. When money supply additions, involvement rates will fall, and investing will increase, thereby exciting the stock market monetary values. By and large talking, these three sorts of effects are positive, that is, money supply addition, the stock monetary values. Therefore, the money supply on stock monetary values is positive.
Exchange Rate & A ; Entire Market Capitalization
Year
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
TMC
1048
3531
3691
3474
9842
17529
19506
26471
48091
43522
38328
42457.72
37055.57
32430.28
89403
327141
121366
Erbium
551.46
576.20
861.87
835.10
831.42
828.98
827.91
827.83
827.84
827.70
827.70
827.70
827.68
819.17
797.18
760.40
694.51
Note: TMC=Total Market Capitalization ( 100 Million Yuan )
ER= Exchange Rate ( Base on 100 Dollars )
Exchange rate, is a currency of another state ‘s currency exchange rate. As an of import economic lever, the exchange rate alterations on the interaction between a state ‘s stock market is reflected in many ways, including: import and export, monetary values and investing. Exchange rate straight affect the international flow of capital. A state ‘s exchange rate, means that the currency depreciation will hike exports and depress imports, therefore advance one countryaa‚¬a„?s hard currency flow, heighten public company ‘s expected returns, Then to some extent, promote the stock prices.However, as can be seen from the information, the relationship between Exchange Rate and stock market monetary values seems non important as expected.
From the position of investor, one of the most sensive factors that consequence the stock monetary values is the motion of bank involvement rate, which have a direct impact on the thrend of stock monetary values. Harmonizing to classical economic theory, the involvement rate is the monetary value of money, and the chance cost of keeping money, which depends on the capital markets supply and demand. The supply of financess from nest eggs, while the demand comes from investerment.Both investing and nest eggs have profound impact on involvement rates. Interest rates can cut down the cost of keeping money, promote the transmutation of nest eggs to investing, thereby increasing the circulation of hard currency flow and corporate price reduction rates, taking to stock market monetary values rise. So involvement rates increase, stock market lower ; on the other manus, involvement rates drop, the stock market higher.
The analysis carried out in this paper indicates that the relationship between each macroeconomic variables and stock market monetary values are difference in China. From the above-named informations and analysis, macroeconomic variables are relevant indexs of the motions of stock market monetary values, to be more specific, CPI, Interest rate, Exchange rate show a negative correlativity with Stock Market Price, while GDP and Money Supply present a positive relationship with Stock Market Price on the long tally.
