Shenzhen Component B Stock Index (SCBSI) is a stock index that tracks the performance of “B” shares listed on the Shenzhen Stock Exchange (SSE). It was created in 1996 to provide a measure of the performance of mainland Chinese “B” shares and to help promote their growth and development in the capital markets.
Unlike the more established SSE Composite Index, the SCBSI tracks only “B” shares, a type of security that was designed to limit foreign ownership in mainland-listed companies. This type of share class is designed to reduce the risk of currency devaluation, protect domestic investors, and encourage inward foreign investment.
The SCBSI’s inclusion criteria are quite strict. Companies must be listed on the SSE and carry at least 50 percent of their equity in the form of “B” shares. Additionally, the total market value of the company must exceed US$750 million and the average daily trading value for the past three months must exceed US$4 million.
The SCBSI consists of all “B” shares listed on the SSE with a total number of about 800 companies accounting for about 40 percent of the index’s overall weight. The index tracks the movements in prices of individual “B” shares, and also includes the overall performance of the broader “B”-share market.
The SCBSI is a price index and is calculated using the weighted average of the prices of all the “B” shares listed on the index. The index value is updated every 15 seconds throughout trading hours and can be used to benchmark various investment portfolios and a variety of benchmark or detailed investment strategies.
The SCBSI is also highly liquid, due to the high number of shares traded daily. It is not only used as a benchmark index but also as a hedging tool among investors. It has become a very good alternative to other stock indices like the SSE Composite, H-Shares and Hong Kong Hang Seng Index.
Throughout most of the late 1990s and early 2000s, the SCBSI was able to track the performance of the overall Chinese stock market relatively well. After the second half of the 2000s, however, the SCBSI began to diverge from the performance of the wider Chinese market. This is mainly because of the volatility in “B” shares due to their more limited investment options and stricter regulations preventing foreign investors from access.
Despite this, the SCBSI has recently seen some resurgence in trading activity, as more Chinese companies have listed their “B” shares overseas. It is this increased liquidity that has given investors additional confidence in the SCBSI and allowed it to fuel further growth in the Chinese markets.
The SCBSI is a good indicator of how the “B” shares market is performing, and it is an important gauge to watch when investing in Chinese stocks. The index provides investors with a transparent view of the “B”-share market, which can be used to inform investment decision-making. Overall, the SCBSI is an important measure for tracking Chinese stock performance and will continue to be a strong indicator of Chinese market conditions for the foreseeable future.
