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Capturing the Complete China Story–The S&P China 500

Recently, S&P Dow Jones Indices launched the S&P China 500, which seeks to capture a more complete story of the Chinese economy than other segmented China equity indices. This paper discusses the demand and objective of the index and reviews its construction, characteristics, and historical performance in comparison with other onshore or offshore China equity indices.

Executive Summary

  • As China is one of the world’s largest economies and is experiencing rapid capital market growth, Chinese equities will likely remain an essential part of long-term investments for many global investors.
  • Offshore-listed shares have represented as much as 30% of the total Chinese equity market, and they have gained increasing traction among global investors who seek exposure to the Chinese economy but are restricted from onshore market investment.
  • There is an increasing demand for benchmarks that integrate the China onshore and offshore listings due to the introduction of various domestic and foreign investment schemes that have broadened capital flows between domestic and international markets.
  • The S&P China 500 is designed to measure the performance of the top 500 companies in China. The index includes companies regardless of their place of listing, thereby reflecting a more complete China story than other segmented China equity indices.
  • As the majority of leading information technology companies are only listed offshore and the S&P China 500 is designed to approximate the sector weights of the broad market, the S&P China 500 is less concentrated in the financials sector and more tilted to the information technology sector than the onshore China indices.
  • Benefitting from more diversified sector, exchange, and currency exposures, performance of the S&P China 500 was less volatile than the onshore China indices while recording almost the same performance after adjusting for risks in the past decade.