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Aug. 20 – Following on from yesterday’s examination of West Bengal and Guangdong Province, today we compare the two regions’ stock exchanges. Kolkata is home to India’s second largest stock exchange after the Bombay Stock Exchange, while Shenzhen, the border city to Hong Kong in China’s Guangdong Province, is home to China’s second largest exchange after Shanghai.
Although the Indian exchanges were incorporated many years prior to China’s, differences between the Calcutta and Shenzhen exchanges do merit examination. The Calcutta Stock Exchange (it still goes by its original name) was incorporated in 1908, although its origins date back far earlier to 1830. The 
Shenzhen bourse dates to 1995.
The Calcutta exchange holds some 3,000 listed companies, while Shenzhen has about 550. However, in terms of capitalization, the two exchanges differ significantly. Here, Shenzhen comes out ahead with a current trading turnover of about US$880.7 billion while Calcutta’s annual market turnover value is about a sixth of this size. Accordingly, Shenzhen is now Asia’s ninth largest stock exchange in terms of market cap, while Calcutta remains a relatively domestic regional player within India.
Other differences lie in the fact that the Calcutta exchange lists almost exclusively privately held businesses established originally by Indian entrepreneurs, as well as a mixture of subsidiaries of foreign owned companies, while the Shenzhen exchange is dominated by Chinese state owned enterprises with the majority ownership being held by the government through a holding company. This does lead to problems over government interference and speculation on the Chinese stock markets, in addition to conflict of interest problems. This results in fairly regular bubbles appearing in the performances of stock exchanges in mainland China. The Calcutta exchange continues to cater for subsidiaries of foreign companies listing, such as Colgate, which the Shenzhen exchange is currently not able to provide.
However, the two exchanges do tend to react to more regional domestic players in terms of the companies listed, and both pay greater attention to the SME market. The Shenzhen bourse operates the Shenzhen Stock Exchange 100 Index, including the top 100 stocks which account for some 40 percent of the total market. Index components also account for 61 percent of the combined after-tax profits of Shenzhen-listed companies, and 43 percent of turnover. The bourse uses the final day’s trading of 2002 as its benchmark.
Calcutta’s market includes the CSE 40 and CSE 50, with the CSE 40 being the benchmark most quoted. It includes major subsidiaries of important Indian multinationals such as Tata, Hindustan Lever, Larsen & Toubro, the State Bank of India and Reliance in addition to subsidiaries of overseas businesses such Castrol, ICI and Eveready, and is based on the Standard & Poors model of benchmarking. The base market cap of these stocks was US$2.8 billion when first inaugurated in 1996, with an index base of 2000 points. Interestingly, both these benchmark indexes are now trading at roughly multiples of four/five compared to their original starting positions. Meanwhile, both exchanges are planning to relocate to newer, larger premises within the next two years in signs that these regional secondary exchanges are in fact now developing at a sustainable and rapid pace, with the Calcutta Exchange, which has suspended trading for the past 18 months, in the advent of India’s new trade agreement with ASEAN, looking set for revitalization.
Further Information
Calcutta Stock Exchange
