Two Big Moments for A-Share Market: Launch of STAR 50 and Revision of SSEC

Technology, Financials Author: Skye Lan Editor: Luke Sheehan Jul 23, 2020 01:57 AM (GMT+8)

The two breakthroughs mark a great improvement in the modern market system.

Image Credit: M.B.M/Unsplash

July 22, 2020 was a historic day for China's stock market as the newly launched Star 50 index and the new-edited SSE Composite Index (SSEC) were launched.

To mark the first anniversary of the Star Market, the Shanghai Star 50 index has been introduced. After the closing bell, the Star 50 will start to track the historical performance. On the first trading day, the index opened rallied at 1474.015 points, closed 0.47% high at 1497.23 points.

The debut of Star 50 is intended to provide a more useful tool for investors to evaluate the market, focused on 50 companies with top market capitalizations. It benchmarked at 1000 points based on the date of December 31 of 2019, which means the star market has risen near 500 points this year. The Star 50 is set as a float-adjusted market capitalization-weighted index, which can avoid giving to many weights to some stocks and therefore affect the stability of the index.

The 50 samples in the index cover over 60% of the entire market capitalization of the Star Market. The average growth of revenue and net income recorded 13.4% and 28.8%, 4 of them have revenue growth exceeded 50% and 12 of them have the figure between 30% to 50%, marking the high growth potential in the sector. 

As the benchmark for the performance of the Star Market, the Star 50 will help encourage more capital flow into the sector. 

At the same time, the SSEC got its first revision in 30 years with the companies in the Star Market included and risk-alerted stocks taken out, to reflect the entire market in a more precise and stable way. 

From the start of 2020, the Star 50 rose by 49.7%. During the same period, the SSEC, Shenzhen Component Index (SZI) and the Growth Enterprise Index (GEI) ran up by 9.28%, 30.93% and 54%, respectively.