The first major reform of Shanghai stock index in 30 years: Retrospectively simulating about 4000 points of the new Shanghai Stock Index

category:Finance
 The first major reform of Shanghai stock index in 30 years: Retrospectively simulating about 4000 points of the new Shanghai Stock Index


On June 19, in response to the call of the market, the Shanghai Stock Exchange planned to revise the preparation plan of the Shanghai Composite Index: to include the relevant stocks of science and technology innovation board and CDR; to eliminate st and * ST stocks; and to extend the listing time requirements for new stocks to be included in the 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.

During this years two sessions, some representatives proposed to improve the compilation method of Shanghai Composite Index. In fact, in recent years, there have been many calls from all walks of life for the revision of the Shanghai composite index compilation plan, such as the Shanghai composite index is distorted and it fails to fully reflect the changes in market structure.

It is understood that the Shanghai composite index was released in 1991, which is the first stock index in the A-share market. The core compilation method has not been changed so far.

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.

According to the strategy team of CSCEC, the old preparation method needs to be optimized. Specifically, the sample stock of the index is all listed enterprises in Shanghai stock market, which is highly representative. However, the traditional enterprises such as financial real estate and industry account for a large proportion in the index. As of June 19, the weight of financial real estate industry has reached 39.2%. With the adjustment and upgrading of Chinas economic structure, a large number of growth enterprises in emerging industries such as information technology are listed on the small and medium-sized enterprise board and the growth enterprise board. The Shanghai Stock Exchange composite has been unable to reflect this change in market structure.

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.

In order to respond to the market call, 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 said on June 19 that, on the basis of listening to market opinions, studying the development and changes of Chinas capital market, and drawing on international experience in index compilation, they continued to study and cautiously launched the revision of Shanghai composite index compilation scheme.

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.

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.

According to the strategy team of Anxin securities, the new securities of Shanghai Stock Exchange were incorporated into the Shanghai Composite Index soon after they were listed on the stock market. At this time, the pricing of new shares was unreasonable and the stock price fluctuated unsteadily, which became a major reason for the distortion of the index. From 2010 to 2019, the average volatility of new shares in one year after listing is 2.9 times that of Shanghai Composite Index over the same period.

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.

Third, the depository receipts issued by red chip enterprises listed on the Shanghai Stock Exchange and the securities listed on the science and Technology Innovation Board will be included in the Shanghai composite index according to the revised compilation plan.

According to the analysis of CICC fund, from the perspective of the current industry composition of Shanghai Composite Index, traditional cyclical industries such as finance, transportation, chemical industry and mining account for a relatively high proportion, while new economic industries such as consumption, medicine and science and technology represent the direction of Chinas economic restructuring account for a relatively low proportion, especially those represented by semiconductor, scientific and technological hardware, Internet, software and high-end manufacturing , which is significantly lower than the proportion and status of these industries in the national economy.

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.

According to the financial engineering team of Everbright Securities, the profitability of Shanghai Composite Index has slightly improved after the revision. The team, referring to the new preparation plan of the Shanghai Composite Index and simulating the new Shanghai Composite Index, can see that the overall earnings have improved: the annual earnings of the revised Shanghai Composite Index since 2000 is 5.47%, which is significantly higher than the 3.67% of the original index (as of June 19). As an index with A-share market barometer function, it will improve the confidence of investors to a certain extent.

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

According to the calculation of CICC fund, if the new index compilation plan is based on the modified inclusion time and the risk warning stock removed, the historical backtracking simulation has been carried out since 2005. The Shanghai composite index was near 3350 on June 19, about 13% higher than the current actual level.

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