Introduction
The Shanghai Stock Exchange (SSE) Circulation Index is an index that tracks the performance of all listing stocks in the SSE. It is a benchmark index for large stocks traded in Shanghai. This index is an important indicator for assessing the overall performance of the stock market in China.
The SSE circulation index was established in November 1993 as the Shanghai Stock Exchange Composite Index (SSE Composite Index). It has since then been used as a reliable reference of the performance of all listing stocks in the SSE. The index is composed of all A-shares that meet certain requirements based on market capitalization, liquidity and other factors. The selection of underlying stocks for the index is reviewed and adjusted periodically, with more than 900 stocks eligible to be included in the index, as of 2020. The index is calculated using a weighted average price of the component stocks, based on their market capitalization.
The SSE circulation index has been soaring since 2017, as a result of stronger economic growth and better-than-expected earnings from listed companies over the years. In 2018, the index surged more than 60%, followed by a further 20% increase in 2019. The market’s positive momentum has continued in 2020, with the index surpassing the 6,000-point markin February of this year, a level not seen since 2015.
The rally in the SSE circulation index has been fueled by a surge in investor confidence in the Chinese economy, despite the ongoing trade tensions between China and the US. The government’s policy of continued monetary easing has helped to boost domestic consumption, while the ongoing technological revolution in China has contributed to increased demand for Chinese products and services.
In addition, the SSE circulation index has benefited from the boom in the new economy sector, with companies such as Xiaomi and Meituan Dianping rising steadily in the index. These companies represent the new wave of economic growth in China, with their innovative business models and services offering high growth potential that has attracted the attention of investors.
Furthermore, investor confidence has been boosted by improved corporate governance across the board. Companies are now making more effort to follow the regulations of the China Securities Regulatory Commission (CSRC), in order to boost their credibility and attract more capital.
Conclusion
The SSE circulation index has been on an upward trajectory over the past few years, as a result of stronger economic growth, better-than-expected earnings from listed companies and improved corporate governance. Investment in the new economy sector and the effects of monetary easing have played a major role in the rally in the index. As the Chinese economy continues to improve, the SSE circulation index is likely to remain buoyant in the foreseeable future.
