Shanghai Stock Exchange Composite Index Series New Rules Take Effect Today

On October 26, the revised compilation methodologies for the SSE Composite Index, the STAR Composite Index and other SSE series composite indices took effect, and the investment operations of related index funds also face new management requirements. According to announcements previously issued by the Shanghai Stock Exchange and China Securities Index Co., Ltd., the revision covers the SSE Composite Index, the SSE A Share Index, the SSE Free Float Index, the STAR Composite Index and related derivative indices, mainly including the addition of a 15% cap on the weight of any single constituent and an adjustment to the timing for removing securities under risk warning. Industry insiders believe the revision helps improve the index risk management mechanism and optimize the index investment ecosystem. For related index funds, the implementation of the new methodology does not mean concentrated portfolio rebalancing is required, but greater attention should be paid to changes in constituent weights and index adjustment arrangements. "The revision adds a rule capping the weight of any single constituent at 15%, aimed at preventing excessive concentration in individual constituents and further improving the index risk diversification mechanism," Yang Delong, chief economist and fund manager at Qianhai Open Source Fund, told reporters. Under the revised methodology, the relevant indices control the weight of any single constituent through weighting factors so that it does not exceed 15%. Weighting factors are adjusted on the next trading day after the second Friday of each month, or when the weight of a newly included constituent exceeds 15%.