MACROECONOMIC FACTORS INFLUENCING SHANGHAI STOCK EXCHANGE COMPOSITE INDEX IN CHINA

Abstract

This research paper aims to determine the macroeconomic factors influencing the Shanghai Stock Exchange (SSE) Composite Index in China. Although there have been many analyses made by previous researchers on various factor that influence the stock market performance but few in China, this research focuses on the Shanghai Stock Exchange market which has the quite huge amount of large listed companies including stated owner companies that is representative in China. China’ financial market is not like the other capitalist state which is fully open and developed. Therefore, five (5) macroeconomic factors are being considered in this research: gross dynamic product (GDP); inflation rate (CPI); interest rate; exchange rate (ER) and money supply (M2) to in determining their relationships with the SSE. Literature support have been reviewed on the influencing factors to understand financial market of China and lead to advice to invest. This research is using Secondary data collected from Shanghai Stock Exchange Market, World Bank and National Bureau of Statistics of China. By using pearson correlation analysis and multiple linear regression to examine the hypotheses and statistical relationships in a yearly basis from January 2012 to December 2018. The key findings reveal that SSE index and inflation rate have significant relationship. On the other hand, this research also indicates that gross dynamic product interest rate, exchange rate and money supply have an insignificant relationship with SSE index.