Currency Anti-substitution and the Impact to Chinese Stock Market in China

Currency Anti-substitution is a behaviour and phenomenon that in the process of developing economy in a nation,in the case of the local currency is strong and persists the trend of appreciation,residents change their preference for the foreign currencies when the local currency value is heavily favored or the local currency assets is obviously higher than the foreign currency assets,then sell off their foreign currency assets and hold the local currency assets to concentrate the foreign currency in the central bank excessively.Basing on the analysis of the connotation of 'hot money',the issue analyzes the purpose and channel of currency anti-substitution,measures the currency anti-substitution rate from 1990 to 2007,and inspects the impact to Chinese stock market produced by currency anti-substitution.The result of the research shows that currency anti-substitution has a large scale,an accelerating flow,and a strong reverse;currency anti-substitution correlates with the domestic share prices positively,what means currency anti-substitution will drive domestic share prices up;it will result in the downward of domestic share prices when reverse is found in currency anti-substitution.