Revision of Shanghai Composite Index: excluding ST shares and listing them in science and Technology Innovation Board

category:Finance
 Revision of Shanghai Composite Index: excluding ST shares and listing them in science and Technology Innovation Board


The Shanghai composite index was released in 1991. It is the first stock index in the A-share market. The core compilation method is still used up to now. In recent years, the market has made many calls for the revision of the Shanghai composite index compilation plan, and opinions such as the Shanghai composite index is distorted and it fails to fully reflect the change of market structure have also appeared. During this years NPC and CPPCC sessions, market professionals, including members of the committee, once again proposed to improve the compilation method of the Shanghai Composite Index.

In order to fully respond to the call of the market, further improve the scientificity and rationality of index compilation, and more accurately represent the overall performance of Shanghai market, Shanghai Stock Exchange and China Securities Index company, on the basis of fully listening to market opinions, studying the development and changes of Chinas capital market, and drawing on the international experience of index compilation, have continued to study and cautiously launched the revision of Shanghai composite index compilation scheme. Shanghai stock exchange established an expert consultation mechanism for index compilation, actively consulted fund companies, insurance asset management, domestic and foreign index companies, universities, research institutes and other experts opinions and suggestions, and finally formed a revised plan for Shanghai composite index compilation.

Insiders said that improving the index compilation plan is the common practice of the international mainstream index, which is conducive to the Shanghai composite index more objectively and truly reflecting the overall performance of Listed Companies in Shanghai. On the one hand, Chinas capital market has established a risk warning system, and the risk of the stock that is subject to risk warning is relatively high. As of the end of May, there are 85 risk warning stocks in the sample of Shanghai Composite Index. Excluding these stocks has little impact on the index itself, but it is conducive to play the role of survival of the fittest in the capital market; on the other hand, there is a large fluctuation in the initial stage of IPO in Chinas securities market. From 2010 to 2019, the average volatility of new shares in one year of listing is 2.9 times that of the Shanghai Composite Index in the same period. Delaying the listing time of new shares and the inclusion of new shares in the index after one year of listing is conducive to enhancing the stability of the Shanghai Composite Index and guiding long-term rational investment. At the same time, considering that the time required for the price stability of new stocks with large market value is generally shorter than that of new stocks with small market value, a quick accounting mechanism for new stocks with large market value is set up. Since the listing, the top 10 stocks with daily average market value are included after 3 months of listing to ensure the representativeness of the Shanghai Composite Index. In addition, the inclusion of science and technology innovation board securities can not only improve the market representation of the Shanghai Composite Index, but also further improve the proportion of science and technology innovation emerging industry listed companies in the Shanghai Composite Index, so that the Shanghai composite index can better reflect the structural changes of the Shanghai stock market.

Science and technology innovation 50 index presents three characteristics

At the same time of revising the compilation method of Shanghai Composite Index, in order to reflect the performance of listed securities of science and technology innovation board in time and provide the investment target and performance benchmark for the market, Shanghai Stock Exchange and China Securities Index Co., Ltd. will release the historical market of Shanghai Science and technology innovation board 50 component index after the closing on July 22, and officially release the real-time market on July 23. At that time, the opening of science and technology innovation board was exactly one year old.

Since the opening of the market, the number of entrepreneurs listed on the scientific and technological innovation board has grown steadily, the market has operated steadily and orderly, and the scientific and technological innovation attributes of enterprises are prominent. As of the end of May, there were 105 listed companies in science and technology innovation board with a total market value of 1.6 trillion yuan, attracting a group of science and technology innovation enterprises that are in line with national strategy, break through key core technology, and have high market recognition to be listed, with high investment in R & D, which is of great significance for promoting high-quality economic development.

The Shanghai Stock Exchange said that as the first index reflecting the price performance of science and technology innovation board securities, the launch of science and technology innovation 50 index helps to provide investors with tools to objectively represent the market and performance evaluation benchmark, and provide tracking targets for index based investment products. Kechuang50 index is a price index, and also a complete set of kechuang50 full income index and net income index is issued to reflect the market of kechuang50 from more dimensions.

According to the introduction, the compilation of science and technology innovation 50 index strictly follows the requirements of objectivity and scientificalness. All the links and elements involved are carefully combed from the perspectives of domestic and foreign experience and the characteristics of science and technology innovation board, so as to take international practices into account as much as possible and based on the actual situation of science and technology innovation board market. Index compilation involves sample space, sample selection, weighting method, sample adjustment and other links. The specific methods are as follows:

One is sample space. Scientific and technological innovation board allows red chip enterprises to issue depository receipts and companies with different voting right structures to be listed, which is a major institutional innovation in the domestic capital market. From the sample range of international representative index, in addition to common stocks, some component indexes are also included in the only listed depository receipts in the market, such as Nasdaq 100 index. In recent years, index institutions generally tend to include companies with different voting rights. For example, MSCI global investable market index series can be included in companies with different voting rights after March 2019. In May 2020, Hang Seng index will include companies with different voting rights into the range of stock selection. Referring to the mature international experience and combining the characteristics of the scientific and technological innovation board, the scientific and technological innovation 50 index, in addition to common shares, includes the scientific and technological innovation board listed depository receipts issued by red chip enterprises and shares of companies with different voting rights into the sample space to enhance the representativeness of the index.

Second, new shares are included in the time. According to the characteristics of the market in the country and region, the international representative component index usually gives new shares the qualification to be included in the sample space after going through a certain market pricing game. For example, the S & P 500 index requires new shares to be included in the sample space after 12 months of listing. In order to reflect the representative role of large market companies in the index in a timely manner, differential timing is generally set. For example, Hang Seng Index divides the timing into three months, six months, 12 months, 18 months and 24 months according to the market value scale. In order to improve the accurate representation of the science creation 50 index to the market and take account of the objective development, we adopt the two stage approach: at the present stage, the new listing securities of the Chuang Chuang board will be included in the sample space after 6 months. When the securities that have been sold for 12 months are adjusted to 100 to 150, they can be adjusted to be listed for 12 months. And the top 5 securities set up the difference of the accounting time.

Third, sample selection method. Market value scale and liquidity are the most basic and core standards of international representative component index. Based on the experience of domestic and foreign representative component index, combined with the objective situation of the development of science and technology innovation board market, the top 50 securities in the top of the total market value of each day are selected as the sample of science and technology innovation 50 index after excluding the securities whose average daily transaction amount in the past year is 10% of the sample space, which can ensure the At the same time of sample fluidity, better representativeness is achieved.

Fifth, sample adjustment. According to the principle of sample stability and dynamic tracking, a quarterly regular adjustment mechanism is established to timely reflect market changes. The effective time of quarterly regular adjustment is the next trading day on the second Friday of March, June, September and December of each year, and a certain buffer zone and adjustment proportion limit are set to ensure the stability of the index and reduce the tracking index brought by frequent sample changes Cost. In addition, temporary adjustment mechanism shall be established for delisting and delisting risk warning.

According to the Shanghai Stock Exchange, the science and technology innovation 50 index generally presents the following characteristics: first, the index is fully representative. As of the end of May, the total market value coverage rate of 50 samples is about 61%, and the coverage rate of R & D expenses, operating revenue, net profit attributable to shareholders of the parent company and net cash flow generated from operating activities is more than 60%. Second, the characteristics of the industry are distinct. The 50 samples are concentrated in the new generation of information technology, biomedicine, high-end equipment and other strategic emerging industries, highlighting the industrial structure characteristics driven by innovation in science and innovation board. The third is the outstanding nature of scientific and technological innovation. The average R & D expenditure of 50 sample companies accounts for 13% of the operating revenue. The high proportion of R & D investment provides a driving force for performance growth. In 2019, the year-on-year growth rate of operating revenue is 13.4%, and the year-on-year growth rate of net profit is 28.8%. There are 4 companies with the year-on-year growth rate of revenue over 50%, 12 companies with the growth rate of 30% - 50%, and 10 companies with the growth rate of 20% - 30%. In the future, with the increase of the number and scale of listed companies on the science and technology innovation board, the index will include more representative and influential companies on the science and technology innovation board, and further improve the investment value of the index.

With regard to the question whether the implementation of the index compilation and revision will affect the continuity of the index and whether it will affect the investors observation of the market situation, the SSE said that the implementation of the revision of the Shanghai composite index compilation is planned to be carried out in a seamless way, referring to the practice of the adjustment of the international representative index compilation, that is, the change of the effective date of the index compilation and the absence of points on the previous trading day The real-time point of the effective date is calculated based on the closing point of the previous trading day and the daily fluctuation of the sample stock. Therefore, the implementation of the compilation and revision of Shanghai Composite Index will not affect the continuity of Shanghai Composite Index and the investors observation of market conditions.

In addition, according to the reporter of Securities Daily, qualified stocks listed on science and technology innovation board and deposit receipts issued by red chip enterprises will be included in the revised Shanghai composite index compilation plan. Next, the Shanghai Stock Exchange will fully listen to the market opinions, and after the deliberation of the expert committee, form the specific arrangement that the technology innovation board listed shares and the deposit receipts issued by red chip enterprises are included in the sample space of the core component index of the Shanghai Stock Exchange (Shanghai Stock Exchange 50, Shanghai Stock Exchange 180, Shanghai Stock Exchange 380, etc.).

Source: responsible editor of Securities Daily: Yang Bin_ NF4368