China Exchanges Services Company: ChiNext Stock Enters CES 120

China Exchanges Services Company Limited (CESC) today (Monday) announced adjustments to the constituents of the CES China 120 Index (CES120). For the first time, a company listed on Shenzhen’s ChiNext, Leshi Internet Information & Technology (stock code: 300104, Leshi Internet), has been included in the index.

In the latest adjustment (for details, please refer to the announcement about constituents of CES China Cross Border Index Series http://www.cesc.com/Content/docpool/Index%20announcement_20151130_eng.pdf), eight stocks have been added to the index. They are Leshi Internet (stock code: 300104), Guotai Junan (stock code: 601211), China National Nuclear Power (stock code: 601985), Orient Securities (stock code: 600958), Everbright Securities (stock code: 601788), Avic Aviation Engine (stock code: 600893), Wanda Cinema Line (stock code: 002739) and China Taiping (stock code: 0966). Leshi Internet is the first stock listed on Shenzhen’s ChiNext that is included in CES120.

“Although CES120 mainly tracks cross-border large-cap stocks, we believe that as the Mainland’s new economy develops, stocks from a more diversified range of industries will attract market attention and become constituents of the CES 120 in the not too distant future,” said CESC Chief Executive Mao Zhirong. “CES 120 fully reflects the overall performance of Mainland stocks listed in the Mainland and Hong Kong, and covers increasingly diversified industries in line with the economic development of the different regions.”

The CES120 is comprised of the 80 most liquid and largest stocks in terms of market value trading on the Shanghai and Shenzhen stock exchanges as well as the 40 most liquid and largest Mainland companies in terms of market value listed on HKEx. The index has been disseminated via information vendors in the Mainland and Hong Kong, and been available
on the CESC, CSI and HKEx websites since10 December 2012.

Products linked to CES 120 include E Fund CES China 120 Index ETF and the CES 120 futures (http://www.hkex.com.hk/eng/prod/drprod/ces/c120fut.htm). CES 120 futures are the only A-share futures product listed outside the Mainland that is jointly licensed by the Shanghai, Shenzhen and Hong Kong stock exchanges. It is also the world’s only index futures with underlying stocks listed in both the Mainland and Hong Kong. The CES 120 futures contract not only provides investors with an effective risk management tool to hedge their Mainland stock positions, but also a primary tool by liquidity providers of Exchange Traded Funds (ETF) to hedge their ETF-related investments.

Since 15 December 2014, CESC has included Shenzhen ChiNext A-shares with a listing history of more than three years for selection as constituents of its indices covering A-shares. Currently, CESC indices that cover A-shares include CES China 120 Index, CES China A80 Index and CES China 280 Index.

Background information:

First cross-border large-cap blue chip—— CES 120

CES 120 is compiled by China Exchanges Services, a joint venture formed by theShanghai, Shenzhen and Hong Kong stock exchanges. It is the flagship index of thecompany’s cross-border index series and the first authoritative Mainland stock index that tracks the stock markets of Shanghai, Shenzhen and Hong Kong. It is comprised of 120 most liquid and largest stocks in terms of market value, including 80 A shares listed on the Mainland and 40 H shares, red chips and private Mainland enterprises listed in Hong Kong. It fully reflects the economic growth of China and provides exposure to a comprehensive China investment universe.

CES 120 is more balanced than other benchmark big-cap stock indices in terms of industry distribution, as cross-boundary investment embraces rare industries in the Mainland and Hong Kong and reduces the over-concentration of financial stocks in big-cap stock indices. Moreover, the index also covers leading enterprises of all industries in the Mainland and Hong Kong, including Tencent (stock code: 0700) of the information technology sector, China Mobile (stock code: 941) of the telecommunications sector and CRRC (stock code: 601766) of the industrial sector.

CES 120 constituents are diversified, covering all types of Mainland stocks listed across the boundary, such as A shares, H shares, red chips and private Mainland enterprises. Their weightings are also more balanced. Greater stock diversification offered by CES 120 as compared to mere A shares or H shares ensures there will be no missing out on the
potential of China’s new economy due to investing in large-cap stocks alone.

First overseas A-share futures product approved by Shanghai, Shenzhen and Hong Kong stock exchanges—— CES 120 futures

CES 120 futures are the only A-share futures product listed outside the Mainland that is jointly licensed by the Shanghai, Shenzhen and Hong Kong stock exchanges. It is also the world’s only index futures with underlying stocks listed in both the Mainland and Hong Kong. The CES 120 futures contract not only serves as an effective risk management tool for investors to hedge their Mainland stock positions, but it is also a primary tool by liquidity providers of Exchange Traded Funds (ETFs) to hedge their ETF-related investments. According to HKEx information, CES 120 futures have an index multiplier of HK$50 per index point, and a minimum fluctuation of 0.5 index point. Each board lot has a contract value of about HK$246,000. A basic deposit of HK$16,000 is payable by clients. Contract months, trading hours and last trading days are largely the same as those for futures on the HSI and H-share index. The final settlement price is the average of the values of CES 120 taken at five minute intervals from 1:00 p.m. up to 3:00 p.m. on the last trading day.

First Mainland ChiNext stock—Leshi Internet formally enters CES 120

Shenzhen ChiNext is an independent board set up in 2009 positioned as that of Nasdaq in the US. Unlike Hong Kong’s GEM, it is not designed to have a mechanism for listed companies to switch board. At present, Mainland stocks from emerging sectors such as information technology, media, high-end manufacturing and medical and health are mostly
listed on Shenzhen ChiNext. In the past two years (November 2013 to November 2015), the total market capitalisation of ChiNext has more than doubled leading to the creation of many large-cap blue chips. In the latest index adjustment, a ChiNext blue-chip, Leshi Internet (stock code: 300104), has been included in CES 120 for the first time with a weighting of 0.5 per cent. The entry of a ChiNext stock has made CES 120 a more comprehensive indicator of China’s economic development.

According to public information, Leshi Internet is a Mainland funded large internet company set up in November 2004. Leshi Internet is a Mainland leading original video site and a firm supporter of original videos with abundant internet video resources and sports copyrights.

Leshi Internet was listed on ChiNext on 12 August 2010 as the Mainland’s first listed video site. Leshi Internet, as a leading ChiNext listed company, has seen its market capitalisation increase from RMB3 billion at the time of its listing debut to more than RMB100 billion today, setting new records in market capitalisation at ChiNext.

The latest adjustments to CES 120 were decided after voting by the CESC expert team at a regular review meeting according to the compilation methodology for CESC China Cross Border Index Series. A-share constituents of CES 120 are selected based on financial conditions, liquidity and market capitalisation. Leshi Internet (stock code: 300104) ranked
73th in the latest selection exercise. Another ChiNext stock East Money Information (stock code: 300059) was on the reserve list of constituents, a sign that more Shenzhen ChiNext stocks will become A-share blue chips.