SSE to Revise Compilation Scheme for SSE Composite Index
In order to make the index compilation more scientific and the index more representative, the Shanghai Stock Exchange (SSE) and the China Securities Index Co., Ltd. announced today that they will revise the scheme for the compilation of the SSE Composite Index on July 22, 2020.
It is common practice for mainstream indexes in the world to improve the compilation scheme.In the revision of the compilation scheme of the SSE Composite Index, both international experience and domestic market development are taken into consideration. Stocks under risk alert will be removed, it will take longer for newly listed stocks to be included, and securities listed on the SSE STAR Market will be included. These will enable the SSE Composite Index to more objectively reflect the overall performance of SSE-listed companies.
The risk alert system has been set up in China’s capital market, and stocks under risk alert are relatively risky. As of the end of May, there were 85 stocks under risk alert among the constituents of the SSE Composite Index. Excluding such stocks has little impact on the index itself, but helps the capital market in selecting excellent listed companies.
It is common for new stocks to fluctuate significantly at the initial stage of listing in China's securities market. From 2010 to 2019, the average price volatility of new stocks within one year of listing was 2.9 times that of the SSE Composite Index over the same period. Postponing the inclusion of a new stock into the SSE Composite Index till one year after listing is conducive to enhanced stability of the SSE Composite Index and rational long-term investment. At the same time, as the price of new large-cap stocks is generally stabilized sooner than that of small-cap stocks, a mechanism for the rapid inclusion of new large-cap stocks has been set up, so that stocks ranking among top 10 on the SSE in terms of average daily market cap will be included in the index 3 months after listing, ensuring the representativeness of the SSE Composite Index.
With the steady development of the SSE STAR Market, and the growing number and scale of innovative science and technology companies listed, the securities of STAR Market companies will be included into the SSE Composite Index according to the revised rules, further enhancing the representativeness of the index.
For the revised compilation scheme of the SSE Composite Index, please refer to the SSE website (www.sse.com.cn) and the website of the China Securities Index Co., Ltd. (www.csindex.com.cn).
The Methodology of SSE Composite Index Will Be Amended