INTRODUCTION TO TOPIC
On 17th August, 2006 in CHINA, the following news [1] was released by the Shanghai stock exchange (SSE):
The SHANGHAI STOCK EXCHANGE (SSE) and CHINA SECURITIES INDEX CO., Ltd. (CSI) announced on December 19, 2007 the construction scheme of SSE Corporate Governance Index [2]
The Shanghai Stock Exchange (SSE) and China Securities Index Co., Ltd. here by announce that the SSE 180 Corporate Governance Index, a new investment target for investors, will be launched on September 10, 2008 to signify trend of the stocks with good corporate governance in the SSE 180 Index.
After operation for some time, the index is publicly released today, with the code of 000019 and the short report of “Governance Index”. Its constituents are all the stocks in the SSE Corporate Governance Sector, with 199 stocks in the present term.
The constituents of the index are composed of the top 100 stocks with large scale and sufficient liquidity in the SSE 180 Index and the SSE Corporate Governance Index, with the base day of June 29, 2007.
INTRODUCTION TO SHANGHAI STOCK EXCHANGE SSE
The Shanghai Stock Exchange was found on 26th Nov, 1990 and in operation on 19th dec in the same year. It's a membership straight governed by the CHINA SECURITIES REGULATORY COMMISSION (CSRC).
The SSE bases its development on the principle of “legislation, supervision, self-regulation and standardization” to create a clear, open, safe and efficient marketplace. The SSE actions to realize a variety of functions: [3]
INDEX INTRODUCTION
Governance index [4]
All stocks from the SSE Corporate Governance board compose the constituents of the SSE Corporate Governance index. The purpose of the SSE Corporate Governance index is to stimulate listed companies to further improve corporate governance and enhance quality of listed companies.
INDEX UNIVERSE SSE180 [5]
INDUSTRY CLASSIFICATION
Listed companies are classified into 10 industries. The classification is based on international prevailing industry classification standard, and corresponding adjustments have been made to adapt to the characteristics of listed companies in China.
CONSTITUENTS SELECTION METHOD
SSE 180 index follows the next 4 steps to select constituents after the index universe is defined.
INDEX CALCULATION [6]
Base And Base Value
SSE 180 index is an index continuing from SSE 30 index. The base day for SSE 180 is June 28, 2002. The base point is 3299.06, which is the closing value of SSE 30 on the base day. The base period is the adjusted market capitalization of all constituents after closing on the base day.
Index Calculation Formula
SSE 180 index are weighted by adjusted number of shares.
Adjusted market capitalization = ? price X adjusted no. of shares. Adjusted market cap of constituents on the base day is also called divisor.
When changes occur to constituent list or the share structure, or constituents market cap changes due to non- trading factors, the divisors are adjusted to keep the index comparable overtime.
Index Real Time Calculation
SSE 180 is calculated real time and the calculation is based on the price data issued by the trading systems of the two exchanges.
Price of each constituent[X] is defined on the following principle:
CSI will decide whether or not to calculate the indices in case of abnormal quotations from the shanghai stock exchange.
FREE FLOAT
To reflect the price fluctuation of tradable shares in the market, SSE 180 adopt free floats shares to calculate index exclusive of non- negotiated shares such as strategic holdings, government holdings, etc.
Among all the A shares outstanding, restricted shares during lock-in-period and the following six categories are usually deemed as non-free float by CSI:
Free float = Total A Shares - Non- Free Float Shares
INDEX MAINTENANCE [7]
When changes occur to constituent list or the share structure, or constituents market cap changes due to non- trading factors, the divisors are adjusted to keep the index comparable overtime, i.e., SSE 180 adopt the “Divisor Adjustment Methodology” to adjust the old Divisor.
Adjusted market cap after adjustment = adjusted market cap before adjustment + adjusted market cap increased or decreased.
INDEX MANAGEMENT
Index advisory committee
CSI establishes an SSE index advisory committee which is composed of domestic and overseas famous experts and scholars specialized in index creating, indexing and market research.
CONCLUSION [9]
In 2006, the total turnover on SSE was RMB 9,191.232 billion, up 184.65% from the previous year. Stock transactions were RMB 5,781.660 billion, representing 62.90% of SSE's total turnover. Daily fund transactions hit RMB 425 million, up 78.57% from the previous year; and daily warrant transactions amounted to RMB 6.200 billion, up 750.48% year on year. When calculated by tradable shares, the turnover rate of stocks was 541.119%.
SSE 180 Index surged by 120.61% from the yearly low of 2204.235 points at the beginning of the year to the yearly high of 4780.226 points at the year-end with a volatility of 116.87% and SSE Composite Index jumped by 143.50% from the yearly low of 1180.963 points to the yearly high of 2675.474 points with a volatility of 126.55%.
In 2006, SSE recorded a total of 41.0147 million trading accounts. Of them, 37.9994 million were A share accounts, while 1.0160 million were B share accounts and 1.9993 million were institutional fund accounts
