The first batch of ten CSI A500 ETFs

The first batch of ten CSI A500 ETFs gets lightning approval!

On September 6th, the much-anticipated CSI A500 Index ETF products made new progress, with the first batch of ten CSI A500 ETFs, including Huatai-PineBridge CSI A500 ETF, Guotai Junan CSI A500 ETF, and Morgan CSI A500 ETF, officially approved. From the submission on September 5th to the approval on September 6th, the entire process took only one day, which can be described as lightning approval.

Securities Times & Securities China reporters learned from the industry that the relevant products are expected to be issued and listed as soon as possible. According to the previous announcement by the China Securities Index Co., Ltd., the CSI A500 Index is scheduled to be officially released on September 23, 2024, which means that the release of the index and the listing of the products are expected to be synchronized.

Lightning approval of a major product

On September 6th, the first batch of ten CSI A500 ETFs, including Huatai-PineBridge Fund, Guotai Fund, Morgan Asset Management, Nanfang Fund, Fullgoal Fund, China Merchants Fund, Harvest Fund, Silver Hua Fund, Jing Shun Great Wall Fund, and Taikang Fund, was officially approved. On September 5th, the ten CSI A500 ETFs were just submitted, and the approval this time is only one day apart from the product submission.

As a broad-based index with a full "new" content, the CSI A500 Index has a unique innovative perspective in its compilation rules.

Huatai-PineBridge Fund introduced to Securities China reporters that the index selects 500 securities with larger market value and better liquidity from various industries as index samples, while focusing on industry-neutral weight allocation ideas, introducing ESG sustainable investment concepts and interconnectivity screening conditions, and multi-dimensionally depicting the performance of core assets in the context of China's economic transformation and upgrading, providing a variety of choices for domestic and foreign long-term capital allocation in A-shares.

Overall, the CSI A500 Index, while focusing on high-quality blue chips, also takes into account emerging growth industries, reflecting many growth points and potential dynamics in the economic transformation. In terms of industry composition, the CSI A500 Index prioritizes the inclusion of emerging leaders in the third-level sub-industries, with new economy industries such as information technology, industry, materials, and healthcare accounting for 18.43%, 18.42%, 12.04%, and 7.69%, respectively, with a total share exceeding 55%, and the number of "specialized, refined, and innovative" constituent stocks accounting for as high as 35.4%, with a significant innovation content higher than comparable broad-based indexes.

Guotai Fund analyzed that, looking at the weight of the constituent stocks, the index reduced the weight by 10% on non-bank finance + banks + food and beverage on the basis of the CSI 300 Index, evenly distributed to other emerging industries, and the weight industry distribution is more consistent with the overall A-shares, with stronger representativeness. The launch of the CSI A500 Index will provide investors with a more diversified market benchmark, which can further reflect the structural changes in the capital market and the transformation and upgrading of industries.

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In the view of Wang Qionghui, General Manager of Morgan Asset Management China, the CSI A500 Index closely follows the new "nine national policies" to promote the development of index investment, enriches the choice of broad-based indexes, focuses on investment opportunities in the high-quality development stage of China's economy, widely covers companies with growth potential, and is expected to become a new weathervane for China's economy and A-shares.Fuguo Quantitative Investment Department fund manager Su Huaqing stated that the A series indices, ranging from A50 to A500, highlight the investability of the indices, offering more advantageous long-term investment returns. They also align more closely with the institutional and international development direction of the A-share market, further enriching the preferred varieties for domestic and foreign capital to allocate A-share assets in the medium to long term. Specifically, looking at the compilation plan of the CSI A500, the selection of the CSI A500 index is different from traditional broad-based indices. It does not simply select the 500 largest companies by market value, but instead selects the largest companies in each industry until 500 are reached. At the same time, by selecting companies across industries, it increases the weight of new economy industries such as high-end manufacturing and technology, better reflecting the direction of economic transformation compared to traditional market-cap-weighted indices. In addition, the index has conducted negative ESG screenings during the selection process to exclude companies with potential hidden risk.

Jingshun Great Wall Fund believes that the CSI A500 index is an effective supplement to the representative broad-based indices of the A-share market. Compared to traditional market-cap-weighted indices, the CSI A500 index gives more consideration to both market value representation and industry balance. Looking at the published index constituents, the CSI A500 has a high and broad market value coverage, balanced industry coverage, and is more in line with the changing trends of China's GDP. Combined with the screening conditions of interconnectivity and ESG, it is expected to attract more domestic and foreign medium to long-term funds to allocate A-share assets, and is expected to become an important reference benchmark for tracking the A-share market in the future.

The CSI A500 ETF is expected to bring fresh capital to the market.

Looking at historical performance, the CSI A500 index has commendable achievements. Data shows that as of June 2024, 76.6% of the sample net asset return on equity or revenue growth rate of the CSI A500 index ranks in the top 50% of the same industry. At the same time, the excellent fundamentals of the constituents have also driven the long-term performance of the index. As of August 29, 2024, since the base date (December 31, 2004), the cumulative increase of the CSI A500 index has reached as high as 279.58%, while the period return performance of the Shanghai 50, CSI 300, and CSI 800 indices is 174.76%, 226.47%, and 248.08% respectively. In comparison, the long-term running ability of the CSI A500 index may be more outstanding.

With the support of multiple rounds of stable growth policies in the early stage, recently, the warming of some economic data has continued to inject confidence into the market. Regarding the future direction of the market, Tan Hongxiang, Deputy Director of the Index Investment Department of Huatai Baorui Fund, analyzed that on the one hand, the global liquidity improvement represented by the Fed's interest rate cut is expected to drive the rise of risk appetite, bringing incremental funds to the core assets that have been relatively underweight in the past two years; on the other hand, the new quality productivity main line formed by the implementation and effectiveness of supply-side policies may become the new "reservoir" to carry liquidity, giving growth assets greater marginal flexibility.

Based on the above analysis, Tan Hongxiang believes that by allocating large-cap blue chips and leading segments of the industry, the overall grasp of the market's expected gradient improvement and the valuation repair opportunity brought by the low-level recovery of risk appetite may be the current better choice.

Jingshun Great Wall Fund believes that the launch of the CSI A500 index is timely. The launch of the CSI A500 index and the listing of related ETF products will bring new vitality to the A-share market and is expected to bring more balanced market allocation products for investors.

Specifically, first of all, whether from the perspective of valuation, risk premium, or trading activity, A-shares are at a historical bottom area. Compared with the stock indices of major overseas markets, the valuation advantage of A-shares is very prominent. With the recent global stock market volatility beginning to increase, and the stability of the RMB exchange rate, the "multiple" value of A-shares has begun to attract more capital.

Secondly, although the current period is experiencing the pain of economic transformation, some indicators show that China's economy is at the bottom area and has structural resilience. Industrial enterprise inventory has bottomed out, CPI and PPI are gently repaired, and some listed companies with global competitiveness have started the corporate profit repair cycle.

In addition, considering that the Fed's interest rate cut cycle is expected to start in the second half of the year, the global risk appetite is expected to increase, and the marginal improvement of overseas liquidity is expected. Due to the prudent fiscal policy in the first half of the year, a larger policy space has been accumulated for the fiscal effort in the second half of the year. Jingshun Great Wall Fund believes that at present, investors should remain optimistic about the A-share market.