Stoxx unveils equal-weighted China A 50 Index

May 22nd, 2013 | By | Category: ETF and Index News

With China’s domestic exchange-traded funds (ETF) industry growing at breakneck speed and its Mainland equity market steadily opening up to foreign investors, innovation surrounding Chinese indices has been a major theme so far this year.

Stoxx unveils equal-weighted China A 50 Index

Stoxx has introduced an equally weighted version of its China A 50 equity index.

European index provider Stoxx, which earlier this year launched the market-capitalisation-weighted Stoxx China A 50 Index, has continued this theme with the introduction of the Stoxx China A 50 Equal Weight Index.

The index represents the constituents of the Stoxx China A 50 Index weighted equally, irrespective of their market capitalisation.

The index is reviewed annually alongside the conventional market-cap index and is specifically designed to underlie financial products such as ETFs and structured products.

Hartmut Graf, chief executive officer of Stoxx said: “Stoxx is not only committed to develop innovative index concepts, but also to apply new strategies to existing indices to offer market participants a broad set of superior benchmarks.”

The index follows the same methodology as the capitalisation-weighted index, except for the weighting process. In the new index, all components share an equal weight, which, by definition, leads to an increased exposure to smaller index components.

In the market-capitalisation-weighted index, the top 10 components make up approximately 46% of the index, whereas in the equal-weight index, this percentage decreases to 20% (as of rebalance date).

Graf added: “In the new Stoxx China A 50 Equal Weight Index, the smallest companies are given the same weight as the largest companies, thus no small group of components dominates the index. This leads to a maximum diversification of China’s largest 50 A-shares.”

The index is rebalanced quarterly and is available in euro, dollar, HK dollar and Chinese Renminbi. Daily history is available back to December 22, 2003.

For immediate equally weighted exposure to large-cap China A shares, domestic Chinese investors could consider the Shanghai-listed Yinhua SSE 50 Equal Weight Index ETF (510430), which is linked to the SSE 50 Equal Weight Index. This index equally weights the 50 largest companies on the Shanghai Stock Exchange.

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