On January 8, the Shanghai Stock Exchange (SSE) and the China Securities Index Company announced the launch plans for the Comprehensive Index and Price Index of the Science and Technology Innovation Board, known as the Sci-Tech Comprehensive IndexThis index is a pivotal development in the landscape of China's capital markets, serving as a reflection of the overall performance of companies listed on the Sci-Tech Innovation Board.

The Sci-Tech Comprehensive Index aims to encompass all securities of listed companies that meet certain criteria, thus providing a broad overview of the market dynamics in this burgeoning sectorIt plays a vital role alongside the Sci-Tech 50 Index, offering complementary insights into the functioning of the boardWhile the Comprehensive Index represents the market as a whole, the Sci-Tech 50 is focused on a more select group of leading enterprises.

In an environment where market pressures are acute, index products, particularly broad-based indices, have proven effective in steering incremental capital flows into the market

This affirms that the timing is ripe for index investingWith a clear intent to channel funds towards the development of "hard technology," the index system for the Sci-Tech sector is steadily maturing, and the investment “toolbox” is expanding remarkablyTo date, 26 different indices linked to the Sci-Tech Board have been released, encompassing a range of types based on scale, themes, and strategiesBy the end of the previous year, the total tracked assets related to these indices reached approximately 280 billion yuan.

Industry insiders assert that the Sci-Tech Comprehensive Index possesses both representational and investable qualities, making it a crucial investment vehicle for the futureBy September 2024, the number of companies listed on the Sci-Tech Board had grown to 581, boasting a total market capitalization nearing 6.34 trillion yuanWith a free-float market cap of 3.14 trillion yuan and a cumulative revenue scale reaching 1.406 trillion yuan, the Sci-Tech Board has catalyzed financial backing for technology innovation enterprises, raising over 1 trillion yuan in capital over five years.

As the number and scale of listed companies on the Sci-Tech Board continue to increase, so too does investor demand for these shares

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Although existing indices like the Sci-Tech 50, 100, and 200 now include a total of 350 samples covering about three-fifths of the securities on the board, there remains a considerable number—over 200 high-growth small and medium enterprises—uncovered by broad indices.

In light of this, the Sci-Tech Comprehensive Index is intended as a more inclusive measure, with over 560 samples and a market cap coverage approaching 97%. This index includes a diverse array of large, mid, and small capitalization stocks, employing a total market capitalization weighting that emphasizes its function as a market representativeThis expanded coverage and better representative quality provide a more comprehensive tool for observing the development of the Sci-Tech Board.

When comparing the Sci-Tech Comprehensive Index and the Sci-Tech 50 Index, three key distinctions emerge:

1. Index Definition: The Comprehensive Index serves as an indicative measure with a coverage rate nearing 97%, focused primarily on representing the entire Sci-Tech Board

   In contrast, the Sci-Tech 50 Index acts as a component index with a 45% coverage rate, fulfilling a more specific investment function.

2. Market Capitalization Distribution: The Comprehensive Index comprises a mix of large, mid, and small-cap stocks, with an average and median total market cap of 11.3 billion and 5.1 billion yuan, respectively—aligning closely with the aggregate marketConversely, the Sci-Tech 50 Index is primarily composed of the largest market cap leaders, with an average market cap of 67.4 billion yuan and a median of 37 billion yuan.
3. Industry Distribution: The industry weightings in the Comprehensive Index are relatively balanced, with significant representation from the semiconductor, electrical equipment, machinery manufacturing, and pharmaceutical sectors—semiconductors alone account for 38%. The Sci-Tech 50, however, displays a strong concentration, with 62% of its weight in semiconductors.

This initiative is part of the SSE's continuous efforts to reform investment strategies and enhance the indexing investment sector by significantly diversifying the types of available indices tied to the Sci-Tech Board

As of now, the SSE has released 26 different indices that cover a variety of scales, themes, and strategic approaches, providing a multi-dimensional view of the performance of Sci-Tech securities.

Since the launch of the first batch of the Sci-Tech 50 ETF in September 2020, the overall scale of indices linked to the Sci-Tech Board has seen rapid growth and increasing diversificationBy the end of 2024, the combined scale of domestic and international Sci-Tech index products exceeded 280 billion yuanOf this, institutions managing the Sci-Tech 50 tracked products accounted for about 200 billion yuan, making up more than 75% of the totalAfter the successful launch of the Sci-Tech 100 product in the second half of 2023, its total scale has grown swiftly to approximately 28.5 billion yuan, representing over 10% of the total.

The index investment approach efficiently directs capital towards the advancement of “hard technology,” bolstering the capacity of capital markets to enhance China's innovation capabilities in critical core technologies.

The Sci-Tech Comprehensive Index, given its unique positioning, investment attributes, and differing return profiles compared to existing broad-based indices, deepens the investment landscape available to market participants

With a notable rising interest in index-based investments, the demand for comprehensive broad market indices continues to grow.

For instance, the Shanghai Composite Index currently boasts over 110 billion yuan in product scaleAs a composite measure of the Sci-Tech Board, the Comprehensive Index—featuring over 500 samples—strikes a harmonious balance between representational depth and investability, solidifying its status as a significant investment target for future endeavors.

Notably, when the Sci-Tech 50 Index was first introduced, it became the initial index for the Sci-Tech Board, utilizing the overall transaction volume of the board for price calculations, thereby providing an overarching viewFollowing the release of the Sci-Tech Comprehensive Index, this function can essentially be replaced, and the SSE has plans to revise the trading calculation methods for the Sci-Tech 50 to reflect actual sample transactions, enabling investors to gauge trading activity of leading companies with greater precision.