The S&P China 500 captures a more complete picture of the Chinese economy than other segmented China equity indices. This paper discusses the demand for and objective of the index and reviews its construction, characteristics, and historical performance in comparison with other onshore and offshore China equity indices.
• 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 globally.
• Offshore-listed shares have represented as much as 34% 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 Chinese onshore and offshore listings. The introduction of various domestic and foreign investment schemes, as well as stock connect programs, 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 Communication Services 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 Communication Services sector than the onshore China indices.
• Benefiting 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 slightly higher risk-adjusted return over the long term.