The indexation investment on the Shanghai Stock Exchange (SSE) in future will adopt a three-step strategy, namely introducing cross-variety ETFs while boosting cross-market and cross-border ETFs, and in order to achieve that, the SSE has signed the agreements on index authorization with nine international index companies and five exchanges, SSE Vice President Zhou Qinye said on November 15.
Zhou noted in his speech at the "4th Index and Indexation Investment Forum" on the same day that the SSE has always attached importance to index and indexation investment. Although the SSE has some traditional indices, such as SSE Composite Index and SSE 30 Index, unfortunately, they are not suitable for investment. In 2002, the SSE released SSE 180 Index, followed by SSE 50 Index. In recent years, the SSE transferred all its index-related maintenance and management to China Securities Index Co., Ltd. (CSI). So far, the number of indices headed with "SSE" has reached nearly 80. Meanwhile, the indexation investment on the SSE has seen a remarkable progress. By the end of last year, there had been five ETFs traded on the SSE. This year, another seven are introduced. These twelve ETFs boast an asset size up to RMB50 billion.
According to Zhou, the SSE is also vigorously promoting innovation of indexation investment. In January 2008, the "Corporate Governance Sector" and "SSE Corporate Governance Index" were launched. To facilitate investment, SSE 180 Corporate Governance Index was released in September 2008. In August 2009, SSE 180 Corporate Governance Index ETF was published. With increasing attention from listed companies to social responsibility, the SSE introduced Social Responsibility Index in July 2009. This August, some fund companies released Corporate Social Responsibility ETFs.
Zhou briefed in his speech on the to-be-launched SSE 380 Index that the SSE is dedicated to building up a blue-chip market. Two decades ago, there were only eight SSE-listed companies. Today, this number climbs to 889. With RMB19 trillion total market capitalization and RMB15 trillion free float market capitalization, a number of blue-chip enterprises representing SSE 50 Index and SSE 180 Index come into being.
"The number of companies in SSE 180 Index is 20% of that of all SSE-listed companies, while their market capitalization and turnover account for 73% and 55% of that of the total, respectively. However, there are still 700 SSE-listed firms which are not included in SSE 180 Index. These firms represent 80% of the number of companies and 45% of the total turnover, among which there are a number of emerging blue chips with great growth potential, strong profitability and distinct industrial advantage." Zhou said.
Thus, the SSE and CSI jointly developed SSE 380 Index, whose constituents are stocks of companies boasting favorable growth potential, distinct industry representation and strong profitability excluding those in SSE 180 Index. These 380 companies are reported to stand for 70% market capitalization and 73% turnover excluding that of SSE 180 Index. According to statistics, the accumulative yield of SSE 380 Index from 2004 to 2010 hits 277%, with the latest P/E ratio at 35.8. The introduction of SSE 380 Index will be followed by the release of corresponding indexation products.