China exceeds Japan as second largest equity market

China has overtaken Japan as the world’s second-largest stock market by capitalisation for the first time since March 2011. It follows the resumption of initial public offerings (IPO) in China and the expectation of more domestic economic stimulus from the Central Government.

According to data compiled by business and financial information service Bloomberg, China’s market capitalisation reached US$4.48 trillion on Thursday, rising by 33 percent from the beginning of this year. In contrast, the market value of companies listed in Japan declined 3.2 percent so far this year to US$4.46 trillion by Thursday.

China had briefly become the world’s second-biggest equity market in March 2011, behind the United States, after an earthquake and tsunami hit Japan causing its share market to plunge, Bloomberg reported.

The equity market growth in China – already the world’s second-largest economy measured by gross domestic product – comes after the Chinese authorities in January resumed permission for domestic IPOs after a halt of more than a year. This month China also gave overseas investors unprecedented access to the Chinese equity sector via the Shanghai-Hong Kong exchange link.

Bloomberg also quoted analysts as saying investors have grown more “bullish” on the Chinese equity market after China cut interest rates last week. The Central Government is expected to roll out more economic stimulus following a slowing – to 7.3 percent – in the nation’s economic growth in the third quarter, the lowest expansion since the first quarter of 2009.