S&P Dow Jones collaborates with Goldman Sachs to create S&P GIVI China A-Share

Jul 24th, 2012 | By | Category: ETF and Index News

S&P Dow Jones Indices has announced the launch of the S&P GIVI China A-Share, the first index of its kind in the Chinese market to combine low volatility and an alternative weighting scheme that weights a stock by intrinsic value, rather than market-capitalisation.

S&P Dow Jones collaborates with Goldman Sachs to create S&P GIVI China A-Share

The S&P GIVI China A-Share provides exposure to the China A-share market of companies quoted in renminbi and listed on the Shenzhen (pictured) and Shanghai stock exchanges.

The index seeks to provide investors with better risk-adjusted exposure to the Chinese equity market and is comprised of A-shares – companies quoted in renminbi and listed on the Shanghai and Shenzhen stock exchanges – that meet the index’s rules-based eligibility criteria.

To achieve its goal of low volatility, the index excludes the 30% of market capitalisation with the highest beta.  The remaining stocks are then weighted by a measure of intrinsic value, determined by book value and discounted projected earnings.

The index forms part of the S&P GIVI (Global Intrinsic Value Index) range of indices, which includes a total of over 2000 indices across 46 countries and 7 currencies. The entire range has been licensed to Goldman Sachs Asset Management (GSAM), which conceived the underlying strategy.

Alexander Matturri, Chief Executive Officer of S&P Dow Jones Indices, said: “With the China Securities Regulatory Commission expanding quotas for foreign investment, investors will have greater opportunities to gain exposure to the China A-shares market which features some of the fastest growing companies in the world. The S&P GIVI China A-Share index presents a unique opportunity for investors to access and measure this important segment of the Chinese market.

“While we believe that market-capitalisation indices will continue to play a critical and growing role in measuring markets worldwide, innovative concepts such as our GIVI indices, that combine different approaches to weighting securities within an index, will present an alternative approach for investors looking to diversify their portfolio beyond traditional market-cap weighting schemes.”

Jim O’Neill, Chairman of Goldman Sachs Asset Management, said: “Prompted by the global financial crisis, investors are seriously questioning their investment philosophy and considering new approaches to asset allocation. As China looks set to become the world’s biggest economy within the next 15 years, the S&P GIVI China A-Share index is, in my view, one of the most relevant benchmarks for investors to access China’s economic activities and growth opportunities.”

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