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Cailianshe News, July 16 (Reporter Yan Jun)"The Shanghai Stock Exchange's 'income' index is here!" "If you can't beat it, change the rules" "The Shanghai Stock Exchange will say goodbye to 3,000 points from now on"... The Shanghai Stock Exchange announced that it will release the real-time quotes of the Shanghai Composite Total Return Index on July 29, which immediately triggered many "mysterious" interpretations.

The reporter interviewed many industry insiders and found that there are at least four misunderstandings:

The first misunderstanding: It is believed that this is a brand new index to be released on July 29. This is a real misunderstanding. The fact is that this total return index was released as early as October 9, 2020, but since July 29, it has changed from only publishing closing points to real-time publishing;

The second misunderstanding: It is believed that this index will make the market bid farewell to 3,000 points and replace the Shanghai Composite Index. This is also a true misunderstanding. The fact is that there will still be multiple indices running in parallel.

The third misunderstanding: Some people believe that the index intentionally skipped 3,000 points. This is a real misunderstanding. When the Shanghai Composite Total Return Index was released, the index base date was set as July 21, 2020, and the index base point was 3,320.89 points.

The fourth misunderstanding: People think that because a new index has been added, the Shanghai Composite Index should be quickly abandoned without further discussion. This is wrong.

What is the "SSE Composite Total Return Index"? Let's clarify the concept of this index. It is a total return index that includes the dividend returns of listed companies.

The Shanghai Stock Exchange will change the index point release from closing time to real-time release from July 29, in order to fully reflect the overall return of the Shanghai securities market and facilitate investors to observe the market from multiple dimensions. The main compilation method is consistent with the Shanghai Composite Index.

Let's explain the origin and difference of the index in detail:

1. According to the different ways of handling sample cash dividends, stock indices are generally divided into price indices and total return indices;

2. The price index does not include sample cash dividends and only reflects the price performance of the index samples;

3. The total return index takes into account the reinvestment income of the sample cash dividends, and comprehensively reflects the index sample price and cash dividend performance.

4. When the index sample distributes dividends, the price index will naturally fall on the ex-dividend date, while the total return index takes into account the reinvestment income of the dividends, and the index points will not fall naturally.

Misconception 1: The Shanghai Composite Total Return Index is a “new index”

The SSE Composite Total Return Index is a derivative index of the SSE Composite Index. The sample consists of eligible stocks and depositary receipts listed on the Shanghai Stock Exchange, and the sample dividends are included in the index returns, excluding ST and *ST securities. The index reflects the overall performance of Shanghai Stock Exchange listed companies after dividend income is included.

When it comes to dividends, the market's first reaction is that since the new "Nine National Regulations", regulators have attached great importance to dividends. It is automatically inferred that this index was released in conjunction with the new "Nine National Regulations" and is understood as a new index.

In fact, the Shanghai Composite Total Return Index is not a new index, but is already 4 years old.

On September 18, 2020, the Shanghai Stock Exchange officially released the SSE Composite Total Return Index to help investors observe the market from more dimensions.

The Shanghai Composite Index was released on July 15, 1991. It is the first stock index in the A-share market and the most important reference indicator for investing in A-shares. The Shanghai Composite Total Return Index is a derivative index of the Shanghai Composite Index. The samples and weights of the two are the same. The difference is that the former further considers the dividend reinvestment income on the basis of the latter, which is an important supplement to comprehensively represent the overall market income situation.

It can be seen that regulators have long included dividends in the considerations for index compilation.

Misunderstanding 2: The goal is to “never see 3,000 points again”

"Setting 3320.89 points as the base point is to avoid 3000 points" and "The index code is changed to 000888, which is homophonic to: Fa Fa Fa". The metaphysical interpretation also has a traffic market.

The truth is that the Shanghai Composite Total Return Index selected July 21, 2020 as the base date when it was first released, which has nothing to do with the current battle to defend 3,000 points. This misunderstanding is actually a reverse interpretation of the current market sentiment.

According to international practice, index compilers generally release corresponding total return indices at the same time as they release price indices, such as the S&P 500 Total Return Index, to allow investors to observe the market from more dimensions.

Starting from July 29, the Shanghai Stock Exchange will release real-time quotes of the Shanghai Composite Total Return Index to the market, with the aim of helping investors observe the overall performance of Shanghai securities and the comprehensive returns of dividend investment income in a more timely, convenient and comprehensive manner.

Misunderstanding 3: 3320.89 points is the base point, and the calculation automatically skips 3000 points.

The statement that "3320.89 points were chosen as the base point in order to automatically skip 3000 points and start calculation" also stems from a lack of understanding of index compilation.

The base date of the Shanghai Composite Total Return Index is July 21, 2020, with the closing price of 3320.89 points on that day as the base point. The index has always existed, but no real-time quotes have been released. This index can also be checked on market software such as Wind to understand its past trends.

Looking at the long-term cycle, the Shanghai Composite Total Return Index hit a new low of 2931.23 points on February 2, and reached a new high of 3430.75 points on May 20, and closed at 3271.5 points on July 16. There is no so-called "automatic skipping 3000 points and starting the calculation".

As the market updates in real time, future investors will be able to see the performance of this index in real time during trading.

Misconception 4: The Shanghai Composite Index should be abandoned immediately after the new index is introduced

As mentioned earlier, the SSE Composite Total Return Index is a derivative index of the SSE Composite Index. The two are different but also related.

The Shanghai Composite Index is the oldest index in the A-share market and is also the index most familiar to Chinese investors. It is the familiar "Shanghai Composite Index" and "Shanghai Stock Index", which aims to reflect the overall stock price performance of listed companies in the Shanghai Stock Exchange.

The "SSE Return" is the total return index of the "SSE Index", which comprehensively reflects the overall performance of the stock prices and dividends of listed companies in the Shanghai Stock Exchange. The two complement each other, and together reflect the overall performance of the stock prices and dividends of listed companies on the Shanghai Stock Exchange from multiple dimensions, providing investors with richer market observation tools.

The Shanghai Composite Index, which is familiar to the market, is a price index that reflects the overall market value changes of Shanghai Stock Exchange listed companies calculated based on the current transaction price. Since the dividends of listed companies have been distributed to shareholders in cash and deducted from the market value, the price index does not reflect the sample cash dividends, but only reflects the price performance of the index sample.

This also leads to differences in the actual points and cumulative rises and falls of the two. Selecting data from July 21, 2020 to May 21, 2024, the points of the Shanghai Composite Index were 3271.5 points and 2974.01 points respectively. Because dividends are included, the Shanghai Composite Index is 297.49 points ahead of the Shanghai Composite Index.

Looking at the cumulative rise and fall, during the same period, the Shanghai Composite Index fell by 1.49% and 10.45% respectively. Due to the inclusion of dividend income, the performance of the Shanghai Composite Index was better than that of the Shanghai Composite Index, which also more truly and accurately reflects the actual return on investment.