What is the Shanghai index?

Also known as the Shanghai Stock Exchange Composite Index, this index measures the value of all stocks (A-shares and B-shares) traded on the Shanghai Stock Exchange.

Where have you heard about the Shanghai index?

It's used when talking about the performances of companies, sectors and the general economy of Shanghai. As Shanghai is such an influential financial centre, these results can impact the national and even worldwide economy.

What you need to know about the Shanghai index.

It is a market composite index, calculated by using a base period of 100; the first day of reporting was July 15, 1991. There are, though, more specific indexes aimed at certain markets, such as SSE 380, SSE 180 and SSE 50 Indexes for top 380, 180 and 50 companies respectively.

The Shanghai index is calculated using a Paasche weighted composite price index formula. This means the index is based on a specific base day for its calculations. For this index that is December 19, 1990 and the base value is 100.

The index measures A-shares, which are shares of the Renminbi currency and traded on the Shanghai and Shenzhen stock exchanges; and B-shared, which are also Renminbi, but are owned by foreigners who cannot purchase A-shares due to Chinese government restrictions.

The market peaked in October 2007 at just under 6,000. A year later, its value stood at only 1,728. In just 2 years that market had trebled and then fallen all the way back.

As many companies in China are still state-run and might be registered in Shanghai (thus feature in the index), government decisions may provide extra risk.