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China’s stock exchanges have introduced additional blue-chip stock benchmarks as part of an effort to increase investment in listed stocks deemed strategically important to the Chinese government.
Investors and analysts say the CSI A50 index released Tuesday gives more weight to sectors such as renewable energy and semiconductor manufacturing, areas central to policymakers’ economic transition and national security visions. It said it aims to promote the creation of investment products.
The introduction of the new benchmark comes as the country’s CSI300 index, made up of listed stocks in Shanghai and Shenzhen, falls more than 11% in 2023 amid disappointing economic growth as a prolonged slide in Chinese stocks triggers record foreign currency outflows. This is in response to what happened. In comparison, the S&P 500 index rose more than 24% over the same period.
The Shanghai Stock Exchange, which jointly owns China Stock Index Company with Shenzhen Stock Exchange, told state media this week that the index provider would “enrich the product pool of stock indexes used to signal a change of gear. ‘I guarantee that. In China’s economic structure. ”
The top constituents of the CSI A50 include Guizhou Moutai Liquor Company, which is on the world’s most valuable alcoholic drinks list, battery company Hyundai Amperex Technology Co., Ltd., chip maker Semiconductor Manufacturing International Co., Ltd., and Jiangsu Heng. Includes Zui Pharmaceutical.
This index’s diversification of focus contrasts with existing benchmarks, whose weighting is primarily based on market capitalization, thus avoiding new drivers of economic growth in the short term.
Analysts said foreign and institutional investors in China tend to focus on the CSI300 index, which favors financial stocks, while retail traders typically focus on the Shanghai Composite Index, which has a heavy weight in financial stocks and industries. It is said that there is
“In recent years, we’ve seen rapid growth in areas that aren’t necessarily reflected in the traditional indexes that retail and international investors tend to track,” said Jason Lui, head of East Asia strategy at BNP Paribas. Stated. “What I can think of is [the CSI A50] As a blue-chip index with appropriate sector diversification. ”
Ten fund managers, including JPMorgan Asset Management’s local retail business, have already applied to launch exchange-traded funds that track the new index, according to filings posted on China’s securities regulator’s website. ing.
“This new index is very diversified and representative,” said Zhang Qi, an analyst at Haitong Securities. He said, “The highlight is the inclusion of new energy-related stocks, which shows the direction of China’s new economy.”
“Until now, it was common for foreign investors to follow the CSI300 index,” said a fund manager at a Shanghai-based foreign asset management company. “These funds now have new options.”
But investors said there was no guarantee that the CSI A50 index, which has fallen 2.6% since its inception, would pose a serious challenge to the established stock benchmark, which has received attention from China’s financial press for decades.
“The next step for us is to see how many of these products come in.” [tracking the CSI A50] It really creates,” said BNP Paribas’ Louie. “It’s still too early to tell, but from our perspective there are more options in the market to allow investors to express more different views.”