SSE benchmark index calculation to be improved

The Shanghai Stock Exchange has announced that it will adjust the calculation methodology of the benchmark Shanghai Composite Index to better reflect market performance.

From July 22, the index will include stocks listed on China’s Nasdaq-style sci-tech innovation board, known as the STAR, to increase the weighting of emerging technology industries and therefore reveal structural changes in the Shanghai market, according to the SSE.

The STAR 50 index consists of 50 STAR-listed firms, with 1,000 points originally based on their prices on December 31 last year. The index will be released after trading on July 22 and offers real-time change in the following trading day, the SSE said on Friday.

The 50 firms cover next-generation information technology, biomedicine and advanced equipment industries.

The STAR market was designed to support companies in the high-tech and strategic emerging sectors, easing listing criteria while adopting higher requirements for information disclosure.

So far, 111 firms have listed on the STAR Market, raising a total of 129.3 billion yuan (US$18.5 billion) through their IPOs. They had a combined market value of 1.77 trillion yuan as of last Wednesday.

The STAR 50 firms include Kingsoft Office, AMEC and Montage, the three firms each with a market value of over 100 billion yuan.

The adjusted index will also include red chip companies, or companies registered overseas but operating on the Chinese mainland, to be listed on the Shanghai market by issuing the China Depositary Receipts, the stock exchange said.

Under the new calculation scheme, newly listed stocks in the Shanghai market shall be included in the index one year after debut, while new stocks that rank among the market’s top ten in terms of daily average market value will be included three months after their debut.

This marks a significant extension from the current 11 trading days, which is believed to help enhance the stability of the index while encouraging long-term and rational investment, the SSE noted.

For stocks already included in the index, they will be removed from the calculation if they receive a risk warning from the stock exchange and will be re-included when the warning is revoked, the bourse said.