What Is The Topic Consultation Before The Shanghai Composite Index Ushering In The First Major Reform Plan?

In June 19th, the capital market awaited two heavy news landing. The Shanghai Stock Exchange announced that it will revise the Shanghai Composite Index from July 22nd, and formally release the 50 component index of Shanghai Composite Index in July 23rd.

The Shanghai composite index was released in 1991. It is the first stock index in the A share market, and the core compilation method is still in use so far. Since the proposal of optimizing the Shanghai Composite Index by many members of the NPC and CPPCC during the two sessions, the discussion on the index compilation method has been continuously heated.

To fully respond to market calls, the Shanghai Stock Exchange launched the Shanghai composite index revision. From the point of view of the plan, the main revisions include: eliminating risk warning stocks, extending new shares into index time, and incorporating them into the listed securities of Chuang Chuang plate.

What has gone through the discussion of the index revision? In twenty-first Century, the exclusive economic news reporter was informed that the Shanghai Stock Exchange and China Securities Index Co respectively organized the special consultation meeting on the compilation of Shanghai Composite Index in June 15th, mainly from the fund companies, insurance information management companies, overseas index companies, and other experts and scholars from universities and research institutions.

On the whole, the participants agreed that the Shanghai composite index should be revised so that the Shanghai stock market performance can be more accurately described. On specific measures, it is suggested that it should be included in the company's board stock, extending the timing of new shares, and eliminating the stocks such as ST and *ST. There are still some differences in adjusting the weighting method.

In addition to the Shanghai composite index adjustment, in the year of the opening of the science and technology board, the 50 component index of the Shanghai stock exchange board, which has a strong market voice, is finally released.

It is understood that the 50 component index of the science and technology board has drawn on the mature experience of domestic and foreign markets, and fully considered the characteristics and objective situation of the science and technology board system. The index is based on December 31, 2019, with a base point of 1000 points. The sample space includes the stock listed on the Chuang Chuang board and the depository receipts issued by the red chip enterprises and listed on the Ke Chuang Chuang board.

Shanghai Composite Index welcomed three adjustments

From the public voice of many former experts, the issue of how to optimize the Shanghai composite index mainly focused on the company structure, the timing of new shares, whether to eliminate ST shares and index weighting.

In order to fully listen to the views of the market and learn from international best practices, the Shanghai Stock Exchange set up an expert consultation mechanism for index establishment. In June 15th, a special consultation meeting was set up for the establishment of the Shanghai Composite Index.

Reporters learned that the participating market organizations and experts and scholars agreed that Ke Chuang board securities should be included in the Shanghai Composite Index.

On the one hand, the science and technology board is an important part of the Shanghai market. The Shanghai composite index reflects the comprehensive index of the Shanghai market, and the Ke Chuang plate securities should be included in the revised Shanghai Composite Index plan. On the other hand, the science and technology innovation board covers a number of technology innovation enterprises, and the introduction of the certificate of board creation will also help to enhance the representativeness of the Shanghai Composite Index and increase the proportion of the new industry of science and innovation. Well reflect the development and change of Shanghai market.

Liu Ninghui, director of the Ministry of security and quantitative investment, said in his interview that "counting into the securities of the" Chuang Chuang "board will help improve the advancement and representativeness of the Shanghai Composite Index. Most of the listed companies of the science and technology innovation board are in the emerging industry, and are the future direction of vigorous development. The Shanghai composite index should not be absent from the science and technology board.

At the same time, experts generally agreed that the new shares should be extended into the time. For a period of time, due to the limited price issuance of new shares and the arrangement of trading system of limit trading, there are continuous trading and high volatility in the initial stage of IPO. After eleventh days of listing, individual stocks are included in the Shanghai Composite Index, which is not conducive to the stability of the index. Most institutions believe that the 6-12 month entry of new shares into the index is the appropriate choice at this stage. In the future, with the reform of registration system and related basic system reform, we can consider fine-tuning.

With the release of the plan, there is a conclusion on the question of when the new shares will be included.

The plan extended the time for new shares to Shanghai Composite Index to extend to 1 years after listing. Considering that the time needed for stabilizing the price of the new market capitalization is shorter than that of the small market value, in order to maintain the good representativeness of the Shanghai Composite Index, it has been listed for 3 months after the listing of the new market capitalization stocks with the daily total market capitalization ranking the top 10 in Shanghai stock market since listing.

In the elimination of ST, *ST and other stocks, there were some views that the Shanghai composite index is an index of all the listed companies in the market. There are a large number of small profits or loss listed companies in the market. These companies should be reflected in the stock index.

However, at the above meeting, most experts believed that they should be excluded. On the one hand, the stock with risk warning is more risky and the investment value is affected. Excluding the stock is conducive to raising the index as a reference for investment decisions. On the other hand, in view of the fact that the capital market delisting system is still in the process of perfection, the performance shares are not fully cleared and delisted, and eliminating such stocks helps to pass the idea of long-term rational investment.

The data show that as of the end of May, the Shanghai composite index contained 85 stocks which were subject to risk warnings, with a total weight of 0.6%. The Shanghai Stock Exchange said that excluding the risk warning stocks would not affect the positioning of its composite index.

Li Xunlei, chief economist of Zhongtai securities, who participated in the above meeting, also told reporters that "with the further advance of the A share delisting system and the survival of the fittest, the exit of the performance shares may increase substantially. It is also necessary to eliminate stocks such as ST with larger delisting risks in the index, so as to avoid the distortion of the index caused by the delisting of the stocks."

Careful assessment should be made in weighting modification.

The improvement of the weighting method is also a popular direction in the relevant discussions on the Shanghai composite index revision.

Reporters learned that compared to the above three points, the weighting method has a greater impact on the index points, and the views of the participants are also somewhat different.

Some experts believe that the weighted total capital stock should be changed into a weighted way of free circulating capital, which is in line with the international mainstream index making practice, and more accurately reflects the real price game in the market, so as to enhance the investability of the Shanghai Composite Index and meet the investment benchmark requirements.

Li Xunlei pointed out that most of the international mainstream indexes are weighted by circulating capital stock. Even in the European and American markets, even if the weighted total capital stock (such as the NASDAQ Composite Index) is used, the difference between the weighted value of the capital stock and the circulating capital stock will not be too great, because it does not exist as large as A shares, such as the large number of legal person shares.

Wang Zhaoyu, senior vice president of the research department of CITIC Securities Research Institute, believes that changing the index weighting method helps to reflect the market structural market and narrow the cognitive bias of investors. In the past, the market has been in the structural market. Because of the weight of total equity, the weight of Shanghai composite index is concentrated in individual sectors such as finance and energy, forming a market phenomenon of "stocks rising and index not rising", causing investors' cognitive bias. Changing the index weighting method will make the weight of the Shanghai composite index more dispersed, and more accurately reflect the true investment performance of the market, which helps to reflect the market structural market.

However, some experts and scholars believe that the revision of the weighting method should be prudent. For historical consistency and comparability consideration, it is suggested that observation and evaluation should be carried out step by step.

"Change index weighting method has great influence on index, and the function orientation of index itself should be fully considered. The weighted index is changed from the weighted total capital stock to the freely circulating capital stock, which will lead to a big change in the index sample equity. The index function should be fully taken into account. The head of quantitative investment department of Huaxia Fund told reporters.

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