Shanghai Stock Exchange And China Securities Index Co.: SSEF Index Series To Be Launched On Jul. 1

The Shanghai Stock Exchange (SSE) and China Securities Index Co., Ltd. (CSI) have recently announced that the SSEF Index Series will be officially launched on July 1, 2011. The Series are made up of SSEF 200 Index, SSEF 300 Index and SSEF 500 Index.

Out of all A-share SSE-listed companies, the top 200, the middle 300 and the top 500 ones in terms of fundamental value (FV) will be respectively handpicked to be the constituent companies of the Series. The fundamental value will be measured through four financial indicators, namely business income, cash flow, net assets and dividend. The weight of the constituent is determined by its fundamental value, thus breaking off the relation between the price of the constituent and its weight in the traditional market capitalization-based index and preventing, to some extent, the phenomenon of excessive overvalued stocks in the conventional market value-based index. For details of the index compilation scheme, please refer to the SSE website (www.sse.com.cn) and CSI website (www.csindex.com.cn).

The SSEF Index Series is characterized by the way of determining the weight of its constituent. Previously, the weight of a constituent of a market value-index was calculated according to its market capitalization (stock price). However, in the Series, the weight of a constituent is based on its fundament value, which in turn depends on its financial indicators. The new method aims to reduce the phenomena of "excessive overvalued stocks and insufficient undervalued ones" in the market value-based indices. FV-based indices' innovative investment concept and outstanding market performances are increasingly recognized by large-scale investment institutions and investors. The world has seen over 70 ETFs and index funds adopting FV-based indices investment strategy, and such famous institutional investors as the California Public Employees' Retirement System, the Nobel Foundation and Japan Pension Service have become important clients of those products. In China, Harvest Fund and PingAn HK have respectively developed the index fund and EFT (listed on the Hong Kong Exchanges and Clearing Limited) on the basis of CSI RAFI 50 Index, the first A-share fundamental index, and Bosera Funds has recently closed the fund-raising for the SZSE Fundamental 200 ETF. The total assets of the above three are nearly RMB4.5 billion. Overseas, the scale of assets relating to FV-based indices boasts more than US$45 billion. FV-based indices have evolved into an index investment strategy with fastest growing assets.

The introduction of the Series will diversify and perfect the SSE index system and resource and promote the development and innovation of index-based investment products on the SSE market. It is learnt that some fund companies have expressed their interests in developing ETFs or index funds based on the Series.