The Shanghai Stock Exchange (SSE) and China Securities Index Co., Ltd. (CSI) announce that they will officially release the SSE STAR Market 50 Component Index on the 11th trading day when the number of stocks and depositary receipts listed on the SSE STAR Market reaches 30. The launch of the index will reflect the overall price performance of the listed companies on the SSE STAR Market in a timely manner, further demonstrate the structure as well as the development and changes of the market, and enrich the SSE index system.
At present, internationally influential and highly recognized indexes are mainly component indexes, which can be used not only as a yardstick for measuring the overall performance of the market, but also as a necessary instrument for asset allocation, investment and risk management as well as performance evaluation.
In order to represent the multi-level market system and highlight the investment function, and reflect the overall performance of companies listed on the SSE STAR Market, the compilation the SSE STAR Market 50 Component Index will fully draw on the experience from domestic and overseas market indexes and the development of indexed investment products. First of all, the number of samples in the component index is determined, as all the stocks and depositary receipts listed on the SSE STAR Market will be included when the number of them is less than 50, and the number of samples will be fixed at 50 after the total number of stocks and depositary receipts exceeds 50, which is conducive to effectively reflecting the stock price performance of the core listed companies as well as facilitating tracking the index by index-based products. Secondly, the index is weighted by free-float market capitalization with an upper limit of weight set for individual stocks, so as to avoid excessively large weights of individual stocks and enhance the investment function of the index, which is also in line with the mainstream mode of compiling a component index.
The listed companies on the SSE STAR Market are mainly from high-tech and strategic emerging industries, and most of them are from the next-generation information technology, biomedicine, high-end equipment and other industries. Highly characterized by scientific and technological innovation, the companies have higher proportions of R&D investment and personnel than those in other sectors on the domestic market. Operating in line with the direction of national strategies and economic restructuring, those listed companies are mostly in a stage of rapid growth. With a sound investment function, the index is conducive to forming a good demonstration effect from the most influential leading companies.
The mode of compiling the SSE STAR Market 50 Component Index will be announced separately. Find details on the SSE website (www.sse.com.cn) and the website of China Securities Index Co., Ltd. (www.csindex.com.cn).
Q&A on SSE STAR Market 50 Component Index
Q1: Why is the SSE STAR Market component index compiled first?
A: At present, the internationally influential and highly recognized indexes are mainly component indexes. Introducing component index will not only reflect the overall trend of the sector in a timely manner, but also help to intensively demonstrate the stock price performance of the core listed companies, providing a target to be tracked by index-based investment products while evaluating the market in an objective and accurate manner. Therefore, the SSE plans to launch the "SSE STAR Market 50 Component Index", which is also abbreviated to “STAR 50”.
Q2: How is the “STAR 50” index compiled?
A: The internationally popular index compilation method is used in the STAR 50 index. With the market value scale and the liquidity indicator adopted as screening criteria, the top 50 stocks and depositary receipts in comprehensive ranking will be selected as sample stocks, weighted by free-float market capitalization, with a 15% upper limit of weight set for individual stocks. The initial samples of the index are stocks and depositary receipts on the SSE STAR Market that have been listed for 11 trading days till the release date. Before the number of sample stocks for the index reaches 50, the stocks and depositary receipts that have been listed on the SSE STAR Market for 11 trading days will be included. When reaching 50, the number of sample stocks for the index will be locked without being increased, and then the samples will be adjusted regularly according to the rules for the index.
Q3: When will the "STAR 50" index be released, and why is the initial number of the sample stocks only 30?
A: The SSE plans to officially release the “STAR 50” index on the 11th trading day after the number of the stocks and depositary receipts listed on the SSE STAR Market reaches 30. This early releasing is to achieve a timely releasing while guarantee a certain level of diversification. On one hand, in order to reflect the overall price performance of the listed companies on the SSE STAR Market in a timely manner and meet the market need, an index that can represent the SSE STAR Market should be launched as soon as possible; on the other hand, 30 sample stocks can initially meet the requirements for diversification of the samples, and with the newly listed stocks and depositary receipts gradually included, the index will be more and more representative.
Q4: When will the stocks and depositary receipts listed on the SSE STAR Market be included in the SSE Composite Index and the SSE core component index?
A: The stocks and depositary receipts on the SSE STAR Market will be included in the SSE Composite Index in accordance with the existing index rules starting on January 22, 2020. The rules for inclusion in the sample space of the SSE Component Index will be announced after the review by the Index Expert Committee. After the first batch of companies are listed on the SSE STAR Market, the SSE will continue to conduct tracking and assessments and fully solicit opinions in the market.