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S&P launches Overseas China 10 Index

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International index provider Standard & Poor’s has launched the S&P Overseas China 10 Index, which will provide tradable exposure to 10 leading Chinese stocks available to foreign

International index provider Standard & Poor’s has launched the S&P Overseas China 10 Index, which will provide tradable exposure to 10 leading Chinese stocks available to foreign investors only through overseas listings.

The universe for the S&P Overseas China 10 Index includes any company domiciled in China that trades on a developed market exchange other than Hong Kong. American depository receipts and global depository receipts are eligible for inclusion in the index.

Foreign investors usually access Chinese equities through baskets and indices based on so-called H-shares, the stocks of companies incorporated in mainland China that are traded on the Hong Kong Stock Exchange.

The new index, comprising 10 of the largest publicly-traded Chinese companies trading on developed market exchanges that are not currently available through H-Shares, is designed for use by structured product providers to create investible products.

‘The S&P Overseas China 10 Index fills a gap in the market by providing exposure to leading Chinese stocks that only trade in overseas exchanges,’ says Steven Goldin, a vice-president with Standard & Poor’s Index Services.

‘It serves as a compliment to H-share based indices by providing access to a number of headline companies and sectors largely not found in these indices, including information technology, alternative energy and health care companies.’

The 10 companies in the index are Baidu.com, Ctrip.com, Focus Media Holding, JA Solar Holdings, New Oriental, Sina Corporation, Sohu.com, Suntech Power Holdings, Wuxi Pharmatech and Yingli Green Energy Holdings. One- and three-year annualised returns for the index were 45.6 per cent and 28.69 per cent respectively at the end of May.

Each eligible stock must have a three-month average daily trading value of at least USD1m as of each semi-annual rebalancing reference date, with the constituent weights driven by liquidity.

The index is a companion to S&P’s existing series of China-based indices, including the S&P/Citic indices, which mainly provide coverage of A-shares issued in China by domestically-listed firms for Chinese investors, and the S&P QDII indices, which enable Chinese institutional investors to invest in overseas capital markets.

Standard & Poor’s Index Services maintains a wide variety of investible and benchmark indices including the S&P 500, which has USD1.32trn invested and USD4.91trn benchmarked, and the S&P Global 1200, a composite index made up of seven regional and country headline indices.

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