SSE and CSI to Revise SSE 180 Index to Better Reflect Performance of Core Listed Companies

To better reflect the overall performance of core listed companies' securities on the Shanghai stock market, Shanghai Stock Exchange (SSE) and China Securities Index Company (CSI) recently announced revisions to the methodology of the SSE 180 Index, which will be officially implemented on December 16, 2024.

The SSE 180 Index, launched in July 2002, is one of the important benchmark indices in China's capital market and the SSE Index system. It consists of 180 large-scale and liquid securities from the SSE. Positioned to reflect the overall performance of large-cap blue-chip companies, it is the most representative index of the SSE. At the time of the index's release, there were only around 700 listed companies on the SSE. To reflect the market structure at that time, the index based the number of constituents in each industry on the industry’s proportion of free float market capitalization, aiming to replicate the industry distribution of listed companies on SSE.

In recent years, with the development of China's macroeconomic and continuous transformation of industries, the market capitalization structure, industry distribution, and board characteristics on the SSE have gradually changed. Currently, there are 2,268 listed companies on the SSE, with 577 of them listed on the STAR Market. These changes indicate room for optimizing the methodology. The revisions include: first, combining liquidity threshold with market capitalization ranking to enhance market cap coverage and index representativeness; second, setting weight limits for individual stocks and top five constituents, introducing industry balance rules which align the combined weight of one primary industry with the proportion of this industry’s free float market capitalization in the index, further improving the index's representation of macro-industry structural changes and SSE-listed company industry distribution; third, integrating ESG sustainable investment principles and excluding securities of listed companies rated C or below in the CSI ESG evaluation to reduce the probability of significant risk events triggered by the constituents.

After the optimization of the SSE 180 Index plan, the index positioning is clearer, with improvements in representativeness, investability, and stability. It better reflects the overall performance of core listed securities on the SSE. Specifically, first, stronger representation of the SSE, with index coverage of market capitalization, revenue, dividends, and net profit reaching around 61%, 63%, 76%, and 82% respectively, marking increases of 2.4%, 1.4%, 4.1%, and 4.9% compared to pre-revision levels. Second, it better reflects the development of new quality productive forces, with weights in "new economy" sectors such as information technology, healthcare, and industry increasing by 9.5%, and weights of the SSE STAR Market rising by 1.8%. Third, the index is more balanced in sector distribution, with the industry distribution of constituents closely aligned with the overall industry characteristics of the SSE, better reflecting changes in the capital market structure and industrial transformation. Fourth, index return and stability have further improved, with an approximately 1% increase in annualized return over the past decade, a 0.1% decrease in annualized volatility, and a decrease in sample turnover rate to around 8% over the past three years.

In recent years, under the leadership of China Securities Regulatory Commission, the SSE has been accelerating system-building on investment side, making continuous high-quality index launches, promoting inflow of long-term funds into the market, and boosting the capital market. As the most widely representative and market-influential index type, broad-based indices play an active role in serving national strategies, supporting the real economy, and promoting the high-quality development of the capital market. Next, the SSE will continue to implement the guiding principles of the Third Plenary Session of the 20th CPC Central Committee, promote comprehensive reforms in the capital market, improve the SSE broad-based index system, provide the market with more diversified investment targets and reference tools, encourage various types of long-term funds to allocate assets through the index-based investment, and accelerate the development of an index-based investment ecosystem focused on rational, value-based, and long-term investments.