The China Securities A500 Index was officially released on September 23rd, and at the same time, the first batch of ETF products tracking this index also successively concluded their fundraising and will be listed soon with significant impact. Not only the China Securities A500, but also with the continuous advancement of the index system construction, the rich product series that continue to be implemented are attracting more and more long-term capital to increase their allocation to the A-share market through these products. Currently, to inject more vitality into the high-quality development of the capital market, including regulatory authorities and various institutions, are also working together to build a "long-term capital for long-term investment" market system, better serving the construction of a financial powerhouse.

Further Enhancing the Representativeness of Broad-based Indexes; the First Batch of A500 ETFs is About to be Listed

As a benchmark for new-era broad-based index products in the A-share market, the new member of the China Securities A-series ETF family - the China Securities A500 ETF has been in the limelight recently. The product only took one day from submission to approval and then quickly started its issuance. During the issuance period, three fund companies, Harvest Fund, Morgan Asset Management, and Jing Shun Great Wall, were the first to reach the fundraising limit of 2 billion yuan and ended the fundraising ahead of schedule. Among them, Harvest Fund and Jing Shun Great Wall Fund adopted the "end-of-day proportional confirmation" principle for allocation, with confirmation ratios of 79.90% and 81.88%, respectively; Morgan and Fu Guo Fund adopted the "full-process proportional confirmation" principle, with confirmation ratios of 76.96% and 87.77%, respectively.

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The China Securities A500 is the first core broad-based index after the new "nine national policies" were released, which more comprehensively depicts the characteristics of industry-leading companies in China's capital market, taking into account both new quality productive forces industries and traditional industries. At a recent symposium organized by the Shenzhen Stock Exchange, participants unanimously believed that the China Securities A500 ETF provides an ideal tool for investors to explore new quality productive forces and layout leading companies in emerging fields. For example, among the A500 constituent stocks, there are 253 companies listed on the Shenzhen market, accounting for more than half, fully reflecting the "excellent innovation and high growth" characteristics of listed companies on the Shenzhen market. The launch of this index-related product provides diversified options for medium and long-term capital to seize investment opportunities in the high-quality development stage of China's economy.

Compared with traditional broad-based ETFs, the China Securities A500 ETF has the characteristics of being broader, newer, and stronger. According to the introduction, the index uses an industry-balanced sampling method, selecting 500 securities with larger market value from each industry as the index samples. The index samples take into account both market value representativeness and industry balance, reflecting the overall performance of representative listed company securities in various industries. In addition, the index also includes more leading companies in emerging fields. According to data provided by the China Securities Index Company, the combined weight of the industrial, information technology, communication services, and healthcare industries is about 50%, higher than comparable broad-based indexes. The latest sample covers all 35 China Securities secondary industries and 92 tertiary industries. As of the end of July 2024, the total market value of the index samples is about 40 trillion yuan, accounting for more than half of the total market value of A-shares.

"From the current market position, a batch of high-quality leading companies are significantly undervalued, and these varieties representing China's core competitiveness will not be absent from the stabilization of the Chinese market," Harvest Fund said, indicating that the current moment is a good time for confidence to lead long-term layout.

From an investment perspective, the overall valuation of A-shares is relatively low at present, also providing investors with a good opportunity to grasp the investment opportunities of leading companies in various industries in A-shares. Compared with the stock indexes of major overseas markets, the attractiveness of A-shares to funds is also gradually increasing.

Kang Le, General Manager of Jing Shun Great Wall Fund, said that the China Securities A500 ETF will provide domestic and foreign investors with a brand-new tool for investing in core assets of A-shares, and at the same time, support high-quality enterprises in various industries through index investment, better serving the real economy and national strategy. At the same time, Jing Shun Great Wall Fund's foreign shareholder Jing Shun Group (Invesco) also expressed expectations for this new broad-based index. Luo Decheng, CEO of Invesco Asia Pacific, said he is optimistic about the future development space of China's ETFs.

As the only foreign fund manager, Wang Qionghui, General Manager of Morgan Asset Management China, also firmly believes in the China Securities "A-series" index. From issuance and listing to investor services, the company will adhere to the concept of "becoming stronger, better, and larger," demonstrating its optimism and determination to do more in China with actions.

Index investment is booming, and the participation of medium and long-term funds is steadily increasing.Index investing connects the general public and social capital on one end, and the real economy on the other, bearing the multiple missions of guiding resource allocation to aid industrial development and serving the wealth management needs of residents. In 2024, domestic index investing has been thriving, with the total scale of the ETF market surpassing the 2 trillion yuan milestone. From a global perspective, broad-based index products, as the type with the widest representation and the most significant market influence, are the top priority in the construction of capital market infrastructure. Currently, domestic index investing is in a new period of opportunity, with the ETF market having broad development prospects.

The Shanghai Stock Exchange's "ETF Investment and Trading White Paper (June 2024)" shows that in the first half of the year, the transaction volume of various types of non-cash ETFs has increased, with broad-based ETFs continuing to attract capital inflows, with a total scale growth of 49% to 1.24 trillion yuan. Among them, the scale of broad-based ETFs in the Shanghai market is 950.9 billion yuan, with mainstream broad-based ETFs such as the CSI 300 ETF and the SSE 50 ETF becoming important allocation tools for institutional investors. The transaction volume of broad-based ETFs also increased significantly in the first half of the year, with an average daily transaction volume of 31.6 billion yuan, and the average daily transaction volume of top broad-based ETFs breaking through 4 billion yuan.

It is worth noting that among many market participants, institutional investors currently hold more than half of the ETF scale. The Shenzhen Stock Exchange's "ETF Investment and Trading White Paper (June 2024)" shows that, according to the disclosed ETF semi-annual report data, as of the end of June 2024, the holding proportions of ETFs by institutional and individual investors are 57% and 43%, respectively. Insurance institutions represented by China Life and New China Life have significantly increased their holdings of ETFs by 33.753 billion yuan in the first half of this year.

Looking at the holding structure of domestic equity ETFs, as of the end of June this year, institutional investors hold the highest proportion of broad-based ETFs, with a total holding scale of 877.454 billion yuan (after穿透联接基金), accounting for 69.60%, mainly including broad-based ETFs such as the CSI 300 ETF, SSE 50 ETF, and CSI 500 ETF. In addition, strategy ETFs represented by dividends are also favored by institutional investors, with a holding scale of 41.056 billion yuan, accounting for 55.97%.

Market participants work together to build a "long-term money for long-term investment" market system.

The new "Nine National Articles" clearly propose to vigorously promote medium and long-term capital into the market and continuously strengthen long-term investment forces. Promoting the development of index investing is an important means to build a "long-term money for long-term investment" policy system.

China Securities Regulatory Commission Chairman Wu Qing said that further optimization of the registration of equity fund products will be carried out, and efforts will be made to promote innovation in index products such as broad-based ETFs. More ETF fund products, including those for small and medium-sized plates such as the ChiNext and STAR Market, will be launched in due course to better serve investors and the national strategy and the development of new quality productive forces.

The person in charge of the Shenzhen Stock Exchange said that efforts are being made from the front, middle, and back ends to create an environment more suitable for medium and long-term capital to enter the market and accelerate the high-quality development of the ETF market. Specifically, the first is to improve the product layout that supports the development of new quality productive forces. Efforts will be made to establish an index compilation system and product R&D system that better meet the development requirements of new quality productive forces, guide funds to flow into areas related to the cultivation and growth of new quality productive forces, and help the capital market better serve the transformation and upgrading of the real economy. The second is to vigorously develop financial products represented by ETFs. Provide more convenient tools and smooth channels for investors to share the fruits of economic development. The third is to improve the quality and efficiency of market services. Strengthen investor companionship, based on the market situation dominated by small and medium investors, carry out more basic and broader market cultivation services, and promote the concept of "rational investment, value investment, long-term investment" into thousands of households.

The Shenzhen Stock Exchange said that in the future, it will further build consensus and exert joint efforts to promote the resolution of pain points and difficulties that restrict the high-quality development of the ETF market, injecting more source water into the high-quality development of the capital market.

The person in charge of the Shanghai Stock Exchange also said that the ETF industry as a whole is undergoing positive changes, and the concept of index investing is further taking root in people's hearts. The exchange will continue to value and strengthen investor services, work together with all market participants to answer questions together, integrate resources, and help each other to grow the increment and optimize the stock, build a sound index investment ecosystem, cultivate and establish the concept of rational investment, value investment, and long-term investment, promote the high-quality development of the ETF market, and better serve the construction of a financial powerhouse. (Reporter Wei Xiayi, Beijing report)