As we enter 2024, the landscape of indices in China is bustling with activityThe first half of the year witnessed the emergence of the CCSI A50 Index, a flagship index representing China's "50-series," capturing the attention of various fund companies eager to investNow, anticipation is building for the upcoming release of the CCSI A500 Index, slated for its official unveiling on September 23.

The announcement of the CCSI A500 Index prompted a common inquiry among investors: with the existing CCSI 500 Index already in circulation, is there really a need for the CCSI A500 Index? This question reflects a broader curiosity about the evolution and relevance of indices in the ever-changing market landscape.

From my perspective, the introduction of the CCSI A500 Index is indeed warrantedHistorically, when referring to the Chinese counterpart of the S&P 500, many have pointed to the CSI 300. However, the CCSI A500 Index may now hold greater legitimacy as China's "S&P 500."

One noteworthy aspect is how the current market environment highlights the investment value of this indexThis need for strategic positioning is further underscored by Morgan Asset Management, which, following the success of the CCSI A50 ETF, is seizing the moment to launch the Morgan CCSI A500 ETF (subscription code: 560533) starting from September 10.

In discussing this ETF, I believe it embodies the qualities of an exemplary student: “great timing, a robust index, and a reputable company.”

Timing is Everything: The external and internal factors playing into the performance of core assets in the A-share market are becoming increasingly favorable.

So why is now the perfect moment for the launch of the CCSI A500 ETF? Both internal and external factors point toward a growing investment appeal for core assets in China's stock market.

Externally, the focus has been on the anticipated interest rate cuts by the Federal Reserve, a topic gaining traction since last year

Advertisements

With discussions of potential rate decreases emerging in July and further solidified by Chairman Jerome Powell's statements at the global central bank meeting in August, speculation surrounds a likely rate cut as early as September 2024. Investors are keenly expressing sentiment that they've waited long enough for this moment.

Market expectations are now aligned around the potential for a Federal Reserve rate cut in September, which could lead to a depreciation of the dollar indexSuch a scenario might trigger substantial capital inflows into emerging markets, directed primarily toward core assets.

Internally, the A-share market is experiencing a stylistic shiftHistorically, there has been a cycle of rotation between large-cap and small-cap stocks in the A-share market, occurring roughly every three to four yearsFrom 2021 to 2023, the segment was predominantly characterized by small-cap stocks.

However, 2024 appears to be ushering in a renaissance for large-cap stocksA notable trend is evidenced by increased performance visibility, where large-cap stocks with market values exceeding 10 billion yuan are demonstrating superior percentage increases and average gains within the year compared to their smaller counterparts.

Additionally, recent government mandates emphasize stricter regulations regarding delistings and reinforcing cash dividends for listed companiesSuch initiatives position large-cap stocks favorably, supported by improved fundamentals and stable cash flowThis environment suggests that large-cap investment strategies might continue to thrive.

To summarize, both external and internal influences indicate that, at this juncture, the core assets within the A-share market possess promising investment value and potential.

A Solid Index: The S&P 500 of A-Shares? It’s Deserving

Historically, when the term “S&P 500 of A-shares” was mentioned, many instinctively referred to the CSI 300. However, I believe the CCSI A500 Index now embodies that role more accurately

Advertisements

Firstly, both the CCSI A500 and the S&P 500 share principles in selecting their constituent stocks, predominantly focusing on the top 500 companies.

Moreover, like the S&P 500, the CCSI A500 Index employs an industry-balanced methodology rather than merely ranking by total market capitalization.

Beyond methodological similarities, the CCSI A500 itself exhibits impressive characteristicsFor instance, its range of industry allocation is extensiveAn analysis of its current sample shows that the CCSI A500 covers all 35 sub-industries and 92 of the tertiary sectors, indicating it's one of the most comprehensive broad-based indices in the marketplace.

In addition, as of the end of July, data shows that the CCSI A500 Index maintains a well-balanced industry distribution, with significant representation from emerging sectors such as industrials, information technology, communication services, and pharmaceuticals, collectively accounting for approximately 50% of its weightThis aligns seamlessly with contemporary calls for “development of new productive forces.”

Moreover, according to data from Wind and the CCSI index company, various metrics showcase the CCSI A500 Index's unique attributes:

(1) Approximately 70% of the CCSI A500 Index constituent stocks have exhibited net asset return rates or revenue growth rates ranked in the top 30% of their respective industries over the past year.

(2) The CCSI A500 Index has consistently outperformed the overall A-share market in terms of return on equity (ROE) over the past decadeRemarkably, only 10% of its constituent stocks contributed to 70% of A-shares' total profits.

These highlights substantiate the notion that the CCSI A500 Index leans towards growth while maintaining its growth potential, with no present indications of encountering bottlenecks or saturation.

Importantly, as one of the notable wide-based "A series" indices, the CCSI A500 Index reflects a continuity in methodology with the CCSI A50 Index, incorporating elements such as the ESG (Environmental, Social, and Governance) sustainable investment concept and cross-border connectivity screening mechanisms

Advertisements

Such attributes facilitate global investors' access to quality A-share assets.

Choosing a Good Company: A Stalwart in the CCSI "A Series"

With favorable timing and a strong index established, the selection of a reputable company becomes crucialIn this light, Morgan Asset Management stands out as a fitting example, embodying the qualities of a good company.

This year, Morgan Asset Management has demonstrated considerable prowess in the ETF realmAs reported, it was among the initial participants in the launch of the CCSI A50 ETF, subsequently marking its completion with success.

Since its debut on March 12, the Morgan CCSI A50 ETF (560350) has seen continuous growth, surpassing 3 billion and then 4 billion yuan in scale within just a few monthsBy mid-June, the ETF was positioned as the second-largest among similar offerings, showcasing a well-balanced holder structure.

Furthermore, based on this year's mid-year report, the ETF enjoys the highest number of holders in its category, with an impressive ratio of institutional to individual investors standing at nearly 6:4. This is not a common feat since, typically, large-cap broad-based indices attract a predominance of institutional investments, often exceeding 80%.

Intriguingly, a unique feature seen in both the Morgan CCSI A50 ETF and the newly launched Morgan CCSI A500 ETF is the implementation of a quarterly mandatory dividend mechanismAccording to the ETF's contract, it calculates excess returns relative to its benchmark index at the last trading day of each quarterIf the excess return exceeds zero, a mandatory dividend is issued, amounting to at least 60% of that excess return.

The benefits of dividends are widely understood, reinforcing Morgan's commitment to the management of the CCSI A500 ETF.

As a foreign public fund company deeply rooted in the Chinese market, Morgan Asset Management has consistently introduced unique products amid fierce competition within the ETF sector

Advertisements

Advertisements