On January 8, the Shanghai Stock Exchange and the China Securities Index Company announced the upcoming launch of the Shanghai Stock Exchange Science and Technology Innovation Board Comprehensive Index, commonly referred to as the "Comprehensive Index," along with its price index, the Comprehensive Price IndexThis important event is set to take place on January 20, expanding the robust index framework associated with the Science and Technology Innovation Board (STIB). Over recent years, this index system has witnessed substantial development, from the introduction of the Sci-Tech 50 Index in July 2020 to the unveiling of the Sci-Tech 100 Index in August 2023, and the anticipated debut of the Sci-Tech 200 Index in August 2024. This evolution signifies a substantial enrichment of investment tools available in the market.

The introduction of the Comprehensive Index signifies a few notable characteristics

To date, the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 Indexes collectively represent a sample size of 350 securities, which covers approximately 60% of the securities listed on the STIBHowever, there remains over 200 burgeoning small and medium-sized enterprises (SMEs) on the STIB that are not represented within the broader index frameworkThe Comprehensive Index aims to address this gap by positioning itself as a holistic representation of the STIB marketWith an expanded sample size of over 560 securities and a market capitalization coverage of nearly 97%, it encapsulates a diverse range of large, medium, and small-cap securities, employing a total market capitalization weighting method to fulfill its representational function for the STIB market.

From a market capitalization distribution standpoint, the Comprehensive Index's average and median sample market capitalizations are recorded at 10.9 billion RMB and 4.7 billion RMB, respectively, aligning closely with the overall market cap of the STIB

• The Japanese Stock Market May Be Overbought
• Can the U.S. Treasury Expect a Turnaround?
• Slight Growth in the U.S. Economy
• The Definitive Thread of Economic Prosperity
• Will Gold Continue Its Bull Run Next Year?

This is significantly lower than the Sci-Tech 50, which boasts averages of 57 billion RMB and median value of 38.2 billion RMB, and the Sci-Tech 100, with averages of 14.7 billion RMB and median values of 13.4 billion RMBNotably, the market cap coverage ratios for the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 Indexes are 44.9%, 23.2%, and 19.5%, respectively, totaling 87.6%. In contrast, the Comprehensive Index provides comprehensive market coverage of around 97%, making it a more representative index for investors.

Examining the industry distribution, the Comprehensive Index reflects a similar distribution to the overall STIB market, with sectors such as semiconductors, electric equipment, machinery manufacturing, and pharmaceuticals leading in terms of quantity and weightThe semiconductor industry, for instance, makes up 38.1% of the index, while electric equipment and machinery manufacturing each comprise around 10%. The pharmaceutical sector is weighted at 8.3%, whereas other sectors possess a relatively scatter-weighted distribution.

Analyzing historical performance provides further insights

Since December 31, 2019, the Comprehensive Index has yielded an annualized return of 2.27%. This performance stands out when compared against the all-yield returns of the Sci-Tech 50 and Sci-Tech 100, which show figures exceeding by 1.97 and 2.78 percentage points, respectivelyOver the long term, with a broader inclusion of newly listed stocks and a more diversified weight allocation, the Comprehensive Index has outperformed both the Sci-Tech 50 and Sci-Tech 100 indexes.

The growth of index-related financial products has also been pivotalSince the establishment of the inaugural Sci-Tech 50 ETF in September 2020, the market for STIB index products has expanded rapidly, with a continuous rise in product diversificationAs of the end of 2024, the combined scale of related domestic and international Sci-Tech financial products exceeded 280 billion RMB, with the Sci-Tech 50 tracking products scaling around 200 billion RMB, representing over 75% of this market

Furthermore, the newly launched Sci-Tech 100 products saw rapid growth in scale after their successful issuance in the latter half of 2023, currently totaling around 28.5 billion RMB, which is more than 10% of the market.

By August 2024, the Shanghai Stock Exchange is scheduled to unveil the Sci-Tech 200 Index, and by September 2024, the first ETF tailored to track this index is anticipated to receive official approvalCurrently, focusing solely on the Sci-Tech 50 Index and its associated fund products, statistics from Tonghuashun iFinD reveal that there are 11 ETFs tracking the Sci-Tech 50 Index, with a cumulative fund size of approximately 176.16 billion RMB as of the third quarter of 2024. Noteworthy is the impressive average annual return of 16.83% for the ten products available in terms of performance data.

Importantly, as the launch of the Comprehensive Index approaches, there is an increasing anticipation within the financial community

In the two days leading up to its debut, fund companies have already secured agreements with securities firms and custodians for the issuance of the ETFMore than ten asset management firms, ranging from leading large-scale firms to medium-sized companies, are actively preparing to submit product proposals, signifying a significant collective interest in this new offering.

Market analysts suggest that the introduction of the Comprehensive Index will not only refine and enhance the STIB index system but also enrich the diversity of broad-based index offeringsThis elevation in local index significance is expected to spur the attraction of fresh capital inflows into the market, ultimately playing a crucial role in supporting technological innovation in key sectorsBy transforming STIB indexes into financial products, capital markets can more effectively facilitate the development of "hard technology," thereby enhancing China’s ability to innovate in critical core technologies.