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 formainstream indexes in the world toimprove the compilation scheme.In the revision of the compilation schemeof the SSE Composite Index,both international experience and domestic market development are taken into consideration. Stocks under risk alert willbe removed, it will take longer for newly listed stocks to be included, and securities listed on the SSE STAR Market will be included.Thesewill enablethe 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 underrisk alertare relativelyrisky. As of the end of May, there were 85stocks under risk alertamong 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 listingin 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 Indextillone year after listing is conducive to enhanced stability of the SSE Composite Index andrationallong-term investment. At the same time, asthe price of new large-cap stocks is generally stabilizedsooner than that of small-cap stocks, a mechanism for the rapid inclusion of new large-cap stocks has been set up, so thatstocks ranking among top 10on the SSEin terms of average daily market capwill be includedin the index3 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 theSSE Composite Indexaccording to the revised rules,further enhancing the representativeness of the index.
For the revised compilation scheme of theSSE 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