Guide to China’s Shanghai Composite Index
China represents the second largest economy in the world, with a 2012 GDP of $8.4 billion that grew at a 7.8% clip. Given the country's growing influence, international investors have been growing increasingly interested in its stock markets. In fact, the world's largest initial public offering for Agricultural Bank of China at $22.1 billion was raised within its markets.
The most popular market for Chinese stocks is the Shanghai Stock Exchange, which has a market capitalization of about $2.3 trillion, making it the sixth largest in the world.
While it's not entirely open to foreign investors yet, the stock exchange remains an extremely important gauge of the country's economic health with 932 listed public companies, as of May 2012.
The Shanghai Composite Index is a stock market index of all the stocks listed on the Shanghai Stock Exchange. Like the NYSE Composite or the NASDAQ Composite in the United States, the index is designed to show the overall performance of the stock market at any given time, with a base value of 100 being issued on December 19, 1990.
For international investors, the Shanghai Composite Index provides an easy glimpse into the health of the Chinese stock market, which can be difficult to obtain elsewhere. Most investors are relegated to trading exchange-traded funds ("ETFs") or American Depository Receipts ("ADRs"), which rarely include all of China's major publicly traded companies.
International investors can find information about the Shanghai Composite Index on the SSE's website at http://english.sse.com.cn/.
The Shanghai Composite Index may be the most quoted Chinese stock market index, but the SSE also provides three other indices for investors to follow, including the SSE 50, SSE 180 and the SSE 380. Simply put, these indices track the 50, 180 and 380 largest members of the Shanghai Composite Index in much the same way that the S&P 500 tracks the 500 largest U.S. stocks.
Aside from these popular options, the SSE also offers a range of market capitalization, asset class, or industrial classification-based indices for investors to follow. These options range from the SSE Consumer Staples Sector Index to the SSE 180 Value Index to the SSE Corporate Bond 30 Index, offering investors a wide range of options when researching the economy.
A full list of these indices can be found on the SSE's website at http://english.sse.com.cn/information/indices/list/.
International investors looking to invest in the Shanghai Composite Index have many options on the surface, but few of them are able to truly mimic its performance. While there are many different Chinese ETFs available in the U.S., it has become common for them to experience significant divergence from the performance of the actual Shanghai Composite Index.
This occurs because the Shanghai Composite Index tracks "A" shares, which are only accessible to local investors and not international funds. Since this market has less liquidity and substantial weighting in smaller companies, the performance can be quite different than popular Chinese ETFs like the iShares FTSE/Xinhua China 25 Index (FXI) that invest in "H" shares.
That said, investors simply looking for exposure to China have many options, including:
China's Shanghai Composite Index is the most popular benchmark for the country's economy and stock market performance. With many different sub-indices, international investors can easily get a glimpse into nearly any individual sector within the economy. But unfortunately, there's no easy way for international investors to place money in the index yet.
For now, international investors will have to settle for the many ETFs and ADRs available for larger Chinese corporations until the market opens up in the future.
The most popular market for Chinese stocks is the Shanghai Stock Exchange, which has a market capitalization of about $2.3 trillion, making it the sixth largest in the world.
While it's not entirely open to foreign investors yet, the stock exchange remains an extremely important gauge of the country's economic health with 932 listed public companies, as of May 2012.
The Shanghai Composite Index
The Shanghai Composite Index is a stock market index of all the stocks listed on the Shanghai Stock Exchange. Like the NYSE Composite or the NASDAQ Composite in the United States, the index is designed to show the overall performance of the stock market at any given time, with a base value of 100 being issued on December 19, 1990.
For international investors, the Shanghai Composite Index provides an easy glimpse into the health of the Chinese stock market, which can be difficult to obtain elsewhere. Most investors are relegated to trading exchange-traded funds ("ETFs") or American Depository Receipts ("ADRs"), which rarely include all of China's major publicly traded companies.
International investors can find information about the Shanghai Composite Index on the SSE's website at http://english.sse.com.cn/.
Other SEE Indices to Follow
The Shanghai Composite Index may be the most quoted Chinese stock market index, but the SSE also provides three other indices for investors to follow, including the SSE 50, SSE 180 and the SSE 380. Simply put, these indices track the 50, 180 and 380 largest members of the Shanghai Composite Index in much the same way that the S&P 500 tracks the 500 largest U.S. stocks.
Aside from these popular options, the SSE also offers a range of market capitalization, asset class, or industrial classification-based indices for investors to follow. These options range from the SSE Consumer Staples Sector Index to the SSE 180 Value Index to the SSE Corporate Bond 30 Index, offering investors a wide range of options when researching the economy.
A full list of these indices can be found on the SSE's website at http://english.sse.com.cn/information/indices/list/.
Investing in the Shanghai Composite Index
International investors looking to invest in the Shanghai Composite Index have many options on the surface, but few of them are able to truly mimic its performance. While there are many different Chinese ETFs available in the U.S., it has become common for them to experience significant divergence from the performance of the actual Shanghai Composite Index.
This occurs because the Shanghai Composite Index tracks "A" shares, which are only accessible to local investors and not international funds. Since this market has less liquidity and substantial weighting in smaller companies, the performance can be quite different than popular Chinese ETFs like the iShares FTSE/Xinhua China 25 Index (FXI) that invest in "H" shares.
That said, investors simply looking for exposure to China have many options, including:
- iShares FTSE/Xinhua China 25 Index ETF (FXI)
- Claymore/AlphaShares China Small Cap ETF (HAO)
- iShares MSCI China Index Fund (MCHI)
Key Points to Remember
China's Shanghai Composite Index is the most popular benchmark for the country's economy and stock market performance. With many different sub-indices, international investors can easily get a glimpse into nearly any individual sector within the economy. But unfortunately, there's no easy way for international investors to place money in the index yet.
For now, international investors will have to settle for the many ETFs and ADRs available for larger Chinese corporations until the market opens up in the future.
Source...