In an interview at the national two sessions, some deputies and committee members pointed out that the compilation method of the Shanghai Composite Index needs to be optimized, and the author also believes that it is very necessary and should attract the full attention of the CSRC, the Shanghai Stock Exchange and other relevant institutions.

There is room for improvement in the representation of Shanghai Composite Index.

Prev distortion is not a new problem. Since 2006, Prev distortion has become a well-known term in the market. For A-share investors, one question that may often be puzzled is why the Prev does not fully reflect the continued high growth of China's economy. China's economy has achieved high growth for 30 to 40 years. China's GDP exceeded 10 trillion yuan in 2000 and reached 99 trillion yuan in 2019. While the Shanghai Composite Index reached 2000 points in 2000, why did it not break through 3000 points in 2020? there is a big contrast between the 10-fold GDP and the 50% increase in the stock index.

In fact, if we look at the total market value of the Shanghai stock market, the growth of the total economic output has been fully reflected.2000The total market capitalization of Shanghai Stock Exchange in 2000 is about3Trillion yuan2019The end of the year has reached35Trillion yuan in the same periodGDP从10Trillion yuan to99Trillion yuan, both10The growth rate is about the same as that of about two times.But why doesn't the index always go up? Why does the Prev index not fully reflect this growth?

We say this is because there is room for improvement in the representativeness of the Shanghai Composite Index.

Four major reasons affect the performance of Prev.

In recent years, the characterization of Shanghai Composite Index is not ideal, and the linkage between stock index and nominal GDP is not ideal, there are four main reasons.

First, the changes of China's listed company structure and macroeconomic structure are not completely synchronized.The importance of finance and traditional cyclical industries in the macro-economic structure has been weakened, while the proportion of traditional industries in the structure of listed companies is significantly higher than that in GDP; the proportion of network economy, digital economy and high-tech economy in the national economy is getting higher and higher, while the representative enterprises (such as BABA, Tencent, Huawei, etc.) are not listed in A-shares, the lack of high-quality emerging enterprises affects the representativeness of the stock index.

Second, with the change of enterprise life cycle, the number of low-profit or loss-making enterprises in listed companies increases.And under the new economic normal, the leading aggregation effect is more obvious, the internal profitability gap of listed companies is further enlarged, while the poor performance stocks are not fully cleared and delisted, which lowers the overall stock pointing position.

Third, the time when new shares are included in the index is unreasonable.For a period of time, due to the limited price issue of 23 times price-to-earnings ratio of new shares in China and the arrangement of the trading system on the trading board, new shares have the characteristics of continuous limit and high volatility at the initial stage of listing, with an average of 9 consecutive limits after listing in the past 5 years. the highest point of the stock price on the 11th trading day after listing is included in the Shanghai Composite Index, and then enters the long bear path of decline, which is an obvious drag on the index.

Petrochina Company Limited is a typical example. The total market capitalization on November 5, 2007 closed at more than 7 trillion yuan, making it the largest market value stock in Shanghai at that time. On the 11th day of listing, it was included in the Shanghai Composite Index at a price of 39 yuan.The stock price has fallen to4Yuan, which is only about 1/10 of what is included in the index.There are many such examples, such as China Shenhua Energy.

The fourth is the problem of weighting method.In 1997, Standard & Poor's put forward the concept of free circulating equity, which has been widely recognized and responded by major index institutions all over the world, and has gradually become the mainstream way of index weighting. Some composite indices have adjusted the total equity weighting to free circulating equity weighting, such as Japan TOPIX Composite Index and Hang Seng Composite Index.ChinaAThe proportion of free circulation of some large market capitalization listed companies is very small, and some are even insufficient.10%As a result, the Shanghai Composite Index deviates greatly from other Shanghai series indices weighted by freely circulated equity. Especially when there is a 28 or 19 market in the market, investors complain that "if you earn an index, you don't make money."

Continuously optimize the compilation of Prev from easy to difficult

The above four reasons for the current expressive problems of Prev stock indexThat is, the corporate structure, the influence of junk stocks, the influence of new shares and the way of weighting actually represent the main possible ways to optimize the compilation of Prev.So, in the current situation, how to optimize and improve the compilation of Prev?

The author believes that since the Shanghai Composite Index is a nationally and even globally recognized representative index of the Chinese stock market, under the circumstances of "casually saying 3000 points, what everyone 'knows in a second' is the Shanghai Composite Index", in order to optimize the compilation of Prev, we should not only start as soon as possible (early change and benefit), but also take into account the stability of the standard (after all, we see it every day and use it every day).

In short, it is necessary to adhere to the principle of "starting now, from easy to difficult, reaching a consensus and moving forward step by step".

Under this principle, it is relatively easy to assess which of the above four paths should be taken first and which step should be taken later.

First, about the structure of the company. Because the Kechuang board is the market segment of the Shanghai Stock Exchange.Science and Technology Innovation Board's inclusion in the Shanghai Composite Index is the meaning of the Shanghai Composite Index, so it should be solved as soon as possible.There must be no dispute among all parties in the market on this issue.

Second, about junk stocks. This kind of company is difficult to represent the overall situation of listed companies, stock price volatility, trading liquidity is poor, has never been in line with the trading standards of institutional investors such as public funds. At the same time, with the promulgation and implementation of the new Securities Law, the reform of the registration system and delisting system has been further promoted. As a market representative index, it should fully reflect the needs of market development and progress, and reflect the changes of market investment mentality and ideas. Given that such stocks account for a very low proportion of market capitalization and have little impact on the index and the market, the controversy is also low. therefore,STStocks should be removed from the index as soon as possible.

Third,About the time when new shares are included in the index.Since the Shanghai Composite Index was released on July 15, 1991, it has made several adjustments in the timing of new shares. The current rule of counting the index on the 11th trading day after listing was established in 2007. It is mainly related to the fact that new stocks did not rise or fall on the first day and generally rose sharply at that time. At the same time, the adjustment of the European STOXX 50 index in 2013 and the adjustment of the S & P index in 2017 all have mature experience in optimizing the timing of new shares. In view of the rich historical experience at home and abroad, it is also recommended to achieve it as soon as possible.

Fourth, about the way of weighting. From an international point of view, in 2005, S & P announced that its US market index (including the S & P 500) had changed from total equity weighting to free circulation equity weighting; since 2006, Hong Kong Hang Seng Index has gradually changed from total equity weighting to free circulation equity weighting; since 2005, Japan's East Stock Exchange TOPIX Index has been divided into three stages.From total equity weighting to free circulation equity weighting.From this point of view, international experience is also very rich and mature. It is also necessary to advance the Prev index as soon as possible. Just because Prev has no experience with such changes, historical consistency and comparability, investors' usage habits and other issues need to be considered, so it may take some time to observe and evaluate.

However, the concept is always used to be broken, and it is very necessary to promote the problem of "changing the law when things change" and changing the way Prev is weighted. And before that,The sooner the inclusion of Science and Technology Innovation Board, the elimination of junk stocks and the re-adjustment of new shares in the index, the better.

We look forward to having a more accurate and representative Shanghai Composite Index as China's capital market enters its thirties.