Dow Jones China 88 Index
The Dow Jones China 88 Index is an index of the largest companies in China. It was created and is maintained by the Dow Jones Indexes of the US. The companies included in the index are chosen based on the size of their market capitalization and other financial criteria. The index is calculated in US dollars and is designed to give investors an indication of the performance of the Chinese equity market as a whole.
Since its launch in April 2008, the Dow Jones China 88 Index has become one of the most widely-tracked indices in China. This is due to the fact that it includes a representative sampling of the largest companies in China - a pool of stocks that make up a substantial portion of the Chinese equity market. The companies in the index are drawn from both the A-share and B-share markets, which are the two separate exchanges that exist in China - the A-shares are reserved for domestic investors, while B-shares are open to select foreign investors.
The Dow Jones China 88 Index is weighted by market capitalization, meaning that larger companies have a bigger impact on the index than smaller ones. As of the end of August 2014, the top five companies in the index by market capitalization were China Mobile, China Life Insurance, Industrial and Commercial Bank of China, China Construction Bank, and PetroChina. These five companies have a combined market capitalization of close to one-third of the index’s total market cap.
Because the Chinese equity market is relatively illiquid, the Dow Jones China 88 Index is highly volatile. Therefore, most investors find that it’s best to take a passive investment approach and buy an index fund that is based on the index. This takes the guesswork out of stock picking, and the index fund carries the same potential for return (and risks) as the index itself.
The Dow Jones China 88 Index is an important indicator of the performance of the Chinese equity market. It makes it easy for investors to track the performance of the largest companies in China, and to assess the overall health of the Chinese economy. Investors who are looking for exposure to Chinese equities would do well to consider this index as part of their portfolio.