New Index Launched Behind the Scenes of Shanghai Stock 580
Gu Hao-ming
Recently, Shanghai Stock Exchange (SSE) has made some moves to reform the compilation of its index series. Firstly, it launched a new index called SSE 580, and secondly, it optimized the compilation method for the existing SSE 380 index. Some market players and related institutions usually adjust their index compilation methods periodically or irregularly, while also creating new indices based on market changes. Investors are accustomed to these adjustments.
The launch of SSE 580 and optimization of SSE 380 have drawn attention because they reflect the regulatory department's new thoughts on market development.
30 years ago, SSE began exploring the release of full-sample indices while compiling comprehensive classification indices. The first product was SSE 30 index. At that time, the idea was to select representative blue-chip stocks as samples and build a new comprehensive component stock index for investors, providing a stable operation, good performance, lively stock characteristics, and relatively large market value investment portfolio.
However, due to market conditions at the time, especially the lack of ETFs (Exchange-Traded Funds), SSE 30 index was published and then quieted down. However, regulatory departments continued to promote the development of indexized investments and guide funds into high-performing stocks.
In the new century, SSE 50 index first appeared, concentrating on high-quality blue-chip stocks listed on the SSE. It played an important role in representing market trends. Based on this index, the SSE 50 ETF was developed as the earliest publicly traded index fund product and caused a stir in the market.
Subsequently, SSE launched various comprehensive classification indices, such as SSE 180, SSE 380, and others. The Shanghai Stock Exchange and other related institutions also released indexes like SHSE 100 and CSI 300. This formed an initial framework for indexized investments.
These indices have provided effective tools to depict market trends, and investors can easily participate in these stocks' investment. In recent years, they have also facilitated the entry of state-owned funds into the market, far exceeding their original expectations.
However, when compiling these indexes, the main focus is on selecting blue-chip stocks for inclusion, with limited attention to mid-cap and small-cap stocks. However, in the overall national economic system, most companies are mid-sized or smaller. Especially since the launch of the growth enterprise market (GEM) and sci-tech innovation board, more companies have emerged, and they urgently need recognition on capital markets to accelerate their development.
After optimizing blue-chip indexes, investors are paying attention to whether mid-cap and small-cap growth stocks' performance can be better reflected in the market. Only if these stocks perform well in the market will the stock market balance and orderly develop, attracting more investors to participate.
In recent years, CSI (China Securities Index) has launched several comprehensive classification indices, including CSI 500, CSI 1000, and CSI 2000. Further optimizing index composition has led to the development of indexes that better depict mid-cap and small-cap stock trends.
SSE has modified the compilation method for SSE 380, making it more suitable for depicting mid-cap stock trends. The newly launched SSE 580 index fills in the gap of lacking small-cap stock indices, not only improving the comprehensive coverage of index series but also creating conditions for more funds to enter promising mid-cap and small-cap stocks through indexized investments.
(The author is a seasoned market professional)