More tech companies added to Shanghai share index
July 28, 2020 Category China News Round-up, Weekly
The Shanghai share index was reorganized for the first time in 30 years. In its first overhaul, the country’s oldest index for mainland-listed A-shares, the Shanghai Stock Exchange (SSE), added 25 STAR Market-listed tech companies, and removed 91 firms labeled as high-risk by the bourse. The number of index constituents stood at 1,493. The move aims to address “index distortion,” the exchange said. Between 2009 and 2019, China’s annual GDP nearly tripled, but the SSE – theoretically an economic barometer with a market capitalization of around USD5.45 trillion – lost 7%. To protect investors, the exchange is expelling “special treatment” shares – the group of companies that have suffered consecutive years of losses, have unusual financial conditions or have been fined for regulatory violation.
To reduce volatility, newly-listed stocks will be included in the SSE index one year after their debut, instead of after 11 trading sessions previously. The top 10 companies by size will be included in three months. To mark STAR Market’s first anniversary, China also officially launched the STAR 50 Index for top-listed firms, which is expected to attract more investment and liquidity to the market. Chinese equities rose on the news. The Shanghai Stock Exchange said in a note: “The revised index can more accurately represent the overall performance of the SSE market after more scientific compilation.” The implementation of the revised methodology of the SSE Composite Index will affect neither the continuity of the index, nor investors’ observation of market conditions, the Shanghai Daily reports.
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