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The Shanghai Composite Index system has added a “new face”.

In order to facilitate investors to observe the overall returns of the Shanghai securities market, the Shanghai Stock Exchange and China Securities Index Co., Ltd. decided to officially release the "SSE Composite Total Return Index Real-time Quotes" from July 29, 2024, and adjust the index code and abbreviation to "000888" and "SSE Return" respectively. The index takes July 21, 2020 as the base date and 3320.89 points as the base point.

Its sample space consists of stocks listed on the Shanghai Stock Exchange and depositary receipts issued by red-chip companies. The calculation method is to divide the "total market value of the sample" by the "divisor" and then multiply it by the "basis point" (3320.89).

It is understood that after a company distributes dividends, the stock price will fall in the short term due to the decrease in the company's net assets, the decrease in net assets per share, the increase in total share capital, ex-rights and ex-dividends, etc. Although the rise and fall of stock prices are not determined by stock dividends, it will still cause a short-term impact and cause investors to misjudge.

Therefore, the calculation method of the Shanghai Composite Return allows the index to incorporate investment situations such as dividends, thereby providing a more comprehensive perspective on market returns.

Some investors believe that the "SSE Return" is an enhanced version of the Shanghai Composite Index.

In fact, there are obvious differences between the two in terms of calculation methods, reflected content and usage.

The Shanghai Composite Index mainly reflects the stock price changes of all A shares and B shares in the Shanghai Stock Exchange, and is one of the important indicators for investors to judge market trends. The "new face" Shanghai Composite Index not only reflects the price changes of stocks, but also comprehensively considers investment income such as stock dividends, aiming to more accurately reflect the overall income of the Shanghai securities market.

In terms of usage, the Shanghai Composite Index trend is often used by investors and analysts to formulate investment strategies and judge the bull or bear market. At the same time, it is also used to compare with stock market indices of other countries to analyze global economic trends.

It is worth noting that the Shanghai Composite Index does not include reinvestment income such as dividends, so it has certain limitations in reflecting the overall market returns.

The birth of the Shanghai Stock Exchange Return Index will make up for this defect. It can better help investors evaluate the market, no longer just focus on the index price, but use it to analyze and judge market trends. In addition, the release of the Shanghai Stock Exchange Return Index enriches the investment tools of the market, provides more choices for investors, and will also encourage more listed companies to pay attention to shareholder returns and promote the healthy development of the A-share market.

Senior securities analysts in the industry said that with the introduction of the Shanghai Stock Exchange Earnings Index, more investors are expected to pay attention to the dividend situation in the A-share market, and encourage investors to go beyond the single index price focus and turn to using more comprehensive earnings indicators to gain insight into market dynamics. This will help reduce the excessive influence of large-cap companies on the index and improve the fairness and justice of the market.

What impact will it have on the future?

The above analysts believe that the release of the new index may trigger short-term market fluctuations and a wave of attention, but in the long run, its impact will inevitably stabilize. Financial institutions may also develop new financial products and services based on the Shanghai Stock Exchange Return Index to meet market demand.