Recently, the Federal Reserve's unexpected rate cut has opened a window for domestic monetary policy adjustments, coupled with the central bank's announcement of a 0.5% reserve requirement ratio reduction, a combination of measures has set the stage for a tumultuous start in the A-share market. Focusing on the core assets of the A-share market and anchoring new quality productive forces, the CSI A500 Index may be the preferred choice for seizing current opportunities.
On October 15th, the first batch of CSI A500 exchange-traded open-end index securities investment funds, including the CSI A500 ETF Nanfang (159352), was officially listed. It is worth mentioning that Nanfang Fund announced that, based on confidence in the long-term healthy and stable development of China's capital market, Nanfang Fund will invest 50 million yuan in its equity fund Nanfang CSI A500 ETF (code 159352) today using its own funds, and has committed to holding it for at least one year. The company will continue to invest in its equity funds using its own funds in the future.
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Industry insiders pointed out that the number of constituent stocks and dividend characteristics of the CSI A500 Index have put higher demands on fund managers' ETF management experience and their ability to create excess returns. Among the first batch of CSI A500 ETF managers, Nanfang Fund has rich experience in managing broad-based ETFs, with a portfolio that includes the CSI 500 ETF, the CSI 1000 ETF, and other broad-based index funds. In the future, Nanfang Fund is expected to fully absorb the management experience of the CSI 500 ETF and other broad-based ETFs, adhere to refined ETF management, and leverage the industry's advanced intelligent index investment platforms and quantitative investment methods to reduce transaction costs in various ways, strictly control tracking deviation, and steadily increase returns.
Anchoring new quality productive forces and focusing on core assets, the CSI A500 Index has a balanced allocation. The index sample space is the CSI Total Index, with industry weights benchmarked against the CSI Total Index. Its constituent stocks have lower coverage of weighted stocks such as real estate and finance, highlighting industries such as information technology, industry, discretionary consumption, and materials, making it a microcosm of the A-share market.
In conjunction with national policies and long-term market changes, the industry market value structure of listed companies tends to align with the long-term changes in the national industrial structure. As an index reflecting the performance of core leading listed companies in the entire market, the constituent stocks of the CSI A500 Index cover all 30 first-level industries of Shenwan, reflecting the trend of macroeconomic structural adjustment and industrial transformation and upgrading. Among them, the weight of advanced manufacturing and information technology industries has increased compared to the CSI 300 Index, while the weight of finance and primary consumption industries has decreased. Significantly over-allocated industries include non-ferrous metals (+1.35%), power equipment (+1.57%), national defense and military (+1.13%), and pharmaceuticals and biology (+1.34%), with a greater focus on industries such as China's new energy, innovative drugs, commercial space, domestically produced large aircraft, and low-altitude economy, with significant characteristics of new quality productive forces.
The CSI A500 is one of the representatives of broad-based indices and belongs to the large and medium-sized style index. The total market value of the index is 39 trillion yuan, and the total free-float market value is 16.5 trillion yuan, covering 56% and 55% of the entire A-share market, respectively. More than 50% of the weight is concentrated on stocks with a market value of over 100 billion yuan, and 99% of the weighted stocks have a market value exceeding 10 billion yuan.
Specifically, for the index's target stocks, the top ten heavy-weighted stocks of the CSI A500 are all in the leading position of their industries, with a weight ratio of 20.85%. The index's weight distribution is more dispersed, and the index covers a broader range, which can depict the structural characteristics of the A-share market's industries from multiple perspectives. In terms of dividend yield, the CSI A500 Index has a high dividend attribute and may become a high-quality tool for long-term investment allocation under the new "Nine National Articles" policy. From a fundamental perspective, in 2023, the average ROE of the constituent stocks of the CSI A500 Index is 10.3%, and the average revenue growth rate is 3.4%. Compared with the CSI 300 Index (average ROE of 10.23%, average revenue growth rate of 2.59%) and the CSI 500 Index (average ROE of 7.28%, average revenue growth rate of -0.03%), the profitability of the constituent stocks is higher than that of similar indices.
The CSI A500 Index, on the one hand, has broad-based attributes, and on the other hand, it surpasses traditional broad-based indices by selecting 500 securities as index samples based on free-float market value and maintaining the sample's first-level industry market value distribution as consistent as possible with the sample space, avoiding the general index's inability to adequately reflect the trend of economic transformation and upgrading due to the use of market value weighting.Additionally, the CSI A500 Index incorporates ESG sustainable investment concepts and elements such as interconnectivity screening: it excludes securities with a CSI ESG rating of C or below, requires constituent stocks to meet the criteria for Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, and have a market capitalization ranking in the top 1500 across the entire market, while also having a market capitalization share greater than 2% within their respective industries.
Looking at past performance, the integration of ESG factors can effectively enhance the overall performance of the index. Taking the traditional broad-based CSI 800 Index as an example, when ESG factors are integrated to form the 800ESG Index, the 800ESG Index has historically achieved an annualized excess return of approximately 1% compared to the CSI 800.
Ultimately, the CSI A500 Index sample not only better meets overseas investment standards and the needs and trends of foreign capital allocation to A-shares but also complies with market value and industry representativeness requirements, further increasing the liquidity and investability of the index.
Drawing on the management experience of the CSI 500 ETF, and adhering to refined management practices, industry insiders have noted that the number of constituent stocks and dividend characteristics of the CSI A500 Index place higher demands on the ETF management experience and the ability to create excess returns for fund managers. Among the first batch of CSI A500 ETF managers, Nanfang Fund has a rich layout of ETF product lines, covering broad-based indices, cross-border markets, industry themes, and more, especially with extensive management experience in broad-based index ETFs. It owns several broad-based index funds, including the CSI 500 ETF (510500), CSI 1000 ETF (512100), and CSI 300 ETF Nanfang (159925). As of August 30th, the CSI 500 ETF (510500) has distributed dividends totaling over 1.2 billion yuan since its establishment.
In the future, during the management process of the CSI A500 ETF Nanfang (159352), Nanfang Fund will fully draw on the management experience of the CSI 500 ETF and other broad-based ETFs, adhere to refined ETF management, and utilize advanced intelligent index investment platforms and quantitative investment methods within the industry to reduce transaction costs in various ways, strictly control tracking deviation, and steadily enhance returns.
Zhu Henghong, the fund manager of the CSI A500 ETF Nanfang (159352), stated that the recent continuous narrowing of the year-on-year decline in PPI may indicate that the profits of the entire industrial enterprise are in a stable recovery state. In the future, as PPI continues to narrow, A-share net profits are also expected to continue to rise. Coupled with the current low valuation, the overall investment cost-performance ratio is relatively high. Regarding the investment research and management of the CSI A500 ETF, the CSI A500 TETF will further optimize the investment structure based on the characteristics of the CSI A500 that are more in line with the new economic structure, enrich investors' in-house choices, and adopt the lowest industry fee rates, that is, a 0.15% management fee and a 0.05% custody fee, bringing convenience and a better experience to investors.