Shanghai indexs first major reform in 30 years: retroactive simulation of about 4000 points in the new Shanghai index

category:Finance
 Shanghai indexs first major reform in 30 years: retroactive simulation of about 4000 points in the new Shanghai index


A number of sellers and buyers said that the move could reduce the degree of stock index distortion, reduce the initial volatility of IPO, help the market survive the fittest, and truly reflect the changes in the industry structure of Shanghai stock market. The revised Shanghai Composite Indexs profitability will slightly improve.

If the historical retrospective simulation is carried out according to the new scheme, some securities companies even calculate that the current point of the new Shanghai composite index is about 4000. According to the prediction of securities companies, new economy companies are expected to bring long bull market to the Shanghai Composite Index.

Why to change: deviation between corporate profits and index performance

Open source securities strategy team believes that earnings of listed companies deviate from index performance. It is said that the annual return rate of Shanghai stock index is only 3.75% since 2000, ranking lower among all major stock indexes. However, from the perspective of operating revenue and net profit, the annual growth rate of operating revenue and net profit of the listed companies of Shanghai Stock Index Rank 5th and 11th respectively. As a standard index to represent the listed companies of Shanghai Stock Exchange, there is a significant gap between the low annual yield and the high profit growth in the past 20 years, which is also an important reason why the market thinks that the distortion of Shanghai Stock Exchange index can not fully reflect the economic operation and the development of listed companies.

CSCI also analyzes the changes in the stock market value of the index sample. At the end of 2010, the total market value of the sample stock of Shanghai composite index was 21.88 trillion. As of June 19, the total market value of the sample stock of Shanghai composite index was 40.48 trillion, an increase of about 1 times. The growth of the market value was basically consistent with the change of Chinas GDP. However, the index closed at 2808.08 at the end of 2010, and closed at 2967.63 on June 19, 2020, with an increase of only 5.68% in the past 10 years. The trend of the index did not accurately reflect China The growth and change of enterprises. As an important index for investors to observe the operation of the market, the reason why the index does not rise in 10 years is attributed to its unreasonable compilation method.

What will be the impact of the three major changes?

It is reported that the Shanghai Stock Exchange and the China Securities Index company decided to revise the compilation plan of the Shanghai Composite Index from July 22, with three revisions in total.

First, if the index sample is subject to risk warning, it shall be removed from the index sample from the next trading day on the second Friday of the next month in which the risk warning measures are implemented. The securities whose risk warning measures have been revoked shall be included in the index from the next trading day on the second Friday of the next month.

To this end, Yang Renwen, financial engineering analyst at Founder Securities, pointed out that up to the latest, there were 1560 Shanghai Composite Index constituent stocks, 90 of which were risk warning stocks, accounting for about 5.77% of the total and 0.56% of the total market value. Due to the small proportion, the effect of eliminating risk warning stock on the index is limited. In the future, the delisting system will be improved day by day. This revision is the basis to ensure that the index remains the best.

According to the analysis of index profitability by CSCI, the net profit of 90 stocks in risk warning state in 2019 was - 48 billion yuan, down 5.96% year-on-year, while the profit growth of Shanghai stock index in 2019 reached 9.6%. With ST stocks excluded from the index, the overall profit level of Shanghai stock index is expected to improve slightly, better reflecting the mainstream profit trend of enterprises in Shanghai stock market.

Second, the newly listed securities ranking in the top 10 of the Shanghai stock market with daily average market value are included in the index after three months of listing, and other newly listed securities are included in the index after one year of listing.

In the teams view, delaying the time for new shares to be included in the index after the new shares have been listed for one year will be conducive to enhancing the stability of the Shanghai Composite Index and guiding long-term rational investment. At the same time, the stock price of the top 10 stocks with daily average market value since listing is stable and fast, which is required to be included three months after listing to ensure the representativeness of the index.

Before the Shanghai Stock Exchange launched the science and technology innovation board, many representative companies of the new economy chose to go public in Shenzhen, Hong Kong or even overseas, which made the performance of the Shanghai Composite Index in the past decade failed to fully reflect the overall picture and structural characteristics of Chinas economic growth. On the one hand, the launch of science and technology innovation board opens the door for many science and technology innovation enterprises to be listed on the Shanghai Stock Exchange; on the other hand, the incorporation of science and technology innovation board securities into the Shanghai Composite Index will directly increase the proportion of Listed Companies in emerging science and technology industries in the index, which is a beneficial supplement to the composition of the Shanghai Composite Index industry.

Can Shanghai Stock Index improve its profitability in the future?

According to the teams simulation, the new Shanghai composite index is currently around 4000 points.

The financial engineering team of Everbright Securities reminded that since the compound closing price was used in the calculation of individual stock yield, the index performance under the new rules in the figure above included part of the dividend income. However, even after deducting the historical dividend of the Shanghai Composite Index, the index under the new rules still slightly outperformed the original index in terms of income performance.

According to the strategy team of Anxin securities, the new economy company is expected to bring long bull market to the Shanghai Composite Index. With a number of Chinas high-tech companies listed on the scientific and technological innovation board and a number of medium-sized technology companies returning to A-share to issue CDR, the proportion of technology industry in the Shanghai Composite Index will continue to rise, which is expected to drive the market to continue to rise, get rid of the magic spell of 3000 points in ten years, and bring long-term bull market that A-share investors are looking forward to.

The team said that after the revision of index compilation method, the growth of science and technology companies increasingly supported the rise of the Shanghai index, and the Shanghai composite index is expected to usher in a long bull market. A good return on investment will directly stimulate residents and industrial capital sentiment, promote foreign capital into the market, and provide new impetus for the long bull market.

Extended reading weighs! Shanghai stock index changed Kechuang 50 index also came (interpreted by the big guy) Shanghai Composite Index welcomes overhaul and promotes barometer of stock market. In fact, Shanghai Stock Exchange: revise Shanghai stock indexs compilation plan Kechuang board securities will be included in this article source: responsible editor of Securities Times: Yang bin_ NF4368