China Securities Index Co.: Emerging Industries Indices, SSE Commodity Equity Index launched

China Securities Index Co.: Emerging Industries Indices, SSE Commodity Equity Index launched


China Securities Index Co., Ltd. (CSI) on 30 April 2010 officially launched the SSE Commodity Equity Index, the SSE Emerging Industries Index and the CSI Emerging Industries Index.

The elaboration by Premier Wen Jiabao on November 3, 2009 at the Capital Science and Technology Communities Meeting on the development blueprint of strategic emerging industries has filled the market with expectations. Following the previous plan of RMB4 trillion investments and the program of revitalizing ten industries, it is anther important move by the central government to steer its economic policy on cultivation of strategic emerging industries for stimulating economic growth and adjusting economic structure. To reflect the overall performance of stocks of China's emerging industries, the Emerging Industries Indices include stocks in such fields as new energy, energy saving and environment protection, electric vehicles, information industry, biomedicine, bio-breeding, national defense and military industry, new materials, hi-tech manufacturing, modern services and marine industry. According to the compilation scheme, the SSE Emerging Industries Index selects the top 50 companies of emerging industries with most representativeness on the Shanghai market as its constituents, while the CSI Emerging Industries Index selects the top 100 companies of emerging industries with most representativeness on the Shanghai and Shenzhen markets as its constituents. Both indices adopt equal weight approach to track in a balanced way the influence of the industries and the stocks of listed companies on the indices.

From the industry distribution, the SSE and CSI Emerging Industries Indices are able to cover the 11 emerging industries recognized so far, with a balanced distribution of the industries in the indices. The two indices, with the total market capitalizations and the free floating market capitalizations of RMB1.0965 trillion and RMB469.5 billion, and RMB1.7719 trillion and RMB839 billion, respectively, both accounting for over 85% of the companies of the same category in the constituent universe, boast good representativeness. Form the end of 2004 to April 2010, the two indices saw rises of 516.74% and 486.11%, respectively, compared with 181% and 206%, the growth rates of SSE 180 Index and SHSE-SZSE300 Index, respectively.

In recent years, the wild price volatility of block commodity worldwide has brought fierce challenges to China's economic development, business operation and investors' decision-making. Closely related with the prices of block commodity, the stock prices of companies engaging in block commodity have drawn wide attention on the securities market. The SSE Commodity Equity Index is composed of 50 stocks with large market capitalization and ample liquidity in three major sectors including energy, basic industrial materials and agriculture industry on the Shanghai market, with an aim to reflect the overall situation of enterprises engaging in block commodity on the Shanghai securities market and the anticipation of investors on block commodity prices as well as provide a performance comparison benchmark and analysis tool for investing in these stocks.

Statistics show that the total market capitalization and the free floating market capitalization of the index have respectively reached RMB4.3321 trillion and RMB692.6 billion, accounting for 93% and 79% of those of the socks of the same category on the Shanghai market, indicating the good representativeness of the index. From the distribution of the categories of the constituent stocks, the index has 17 stocks of energy, 22 of industrial materials and 11 of agriculture industry, accounting for 49%, 41% and 10% of the total. From the beginning of 2004 to April 29, 2010, the index surged by 174%, compared with 135%, the growth rate of the SSE 180 Index in the same period.

It is learnt that thematic investment, characterized by selection of relevant investment targets across different industries and regions according to the theme, is a popular investment mode against the backdrop of economic globalization. The theme refers to the key factors on the market that will impose major influences on the economic development and the profits of the enterprises. By timely discovery of the long-term development trend of economic entities as well as the driving forces of the occurrence and continuance of the trend, thematic investment will take relevant industries and listed companies to be benefited from the trend into its investment scope. To facilitate the constant development of various thematic investments, the thematic investment indices, offering references and basis to investors in their investment, are seeing rapid development. This kind of indices, in addition to directly reflecting the performance of the theme, can also be used as the carriers for indexation investment. By copying thematic indices, a variety of thematic investments can be achieved in a transparent and low-cost environment. The SSE Commodity Equity Index and the SSE and CSI Emerging Industries Indices are developed for fund companies to deign new products. So far, fund products that track the three indices are under development.