Tracking the Benefits of Growth

Transcription

1 Tracking the Benefits of Growth

2 I. Introduction of the SZ-HK Stock Connect II. Key Features of Shenzhen Stock Market III. Universe of SZ Connect IV. Flagships of SZSE Index Family 1

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4 SZ-HK Stock Connect is a mutual stock market access mechanism between the Mainland China and Hong Kong under which Shenzhen Stock Exchange (SZSE) and the Stock Exchange of Hong Kong Limited (SEHK) have established technical connectivity to enable investors in the Mainland and Hong Kong to trade eligible shares listed on the other s market through their local securities companies or brokers. SZ Connect refers to that investors appoint Hong Kong brokers to trade eligible shares under SZ-HK Stock Connect listed on SZSE by sending orders (order routing) to SZSE through a securities trading service company to be established by SEHK in Shenzhen. HK Connect under SZ-HK Stock Connect refers to that investors appoint the Mainland securities companies to trade eligible shares under SZ-HK Stock Connect listed on SEHK by sending orders (order routing) to SEHK through a securities trading service company to be established by SZSE in Hong Kong. 3

5 Comparison Stock Connect QFII RQFII Eligible Investor SZ Connect: All investors will be eligible to trade shares listed on Main Board and SME Board. At the initial stage, eligible investors for the ChiNext Market will be limited to institutional professional investors (IPI) as defined in the paragraph 15.2 of the Code of Conduct for Persons Selected institutional investors Licensed by or Registered with the SFC of Hong Kong. Selected institutional investors Currency Quota Eligible Products Regulation of Funds HK Connect: Institutional investors, and Individual investors with a balance of at least RMB 500,000 in their cash and securities accounts. Transactions in RMB Applies to market as a whole Selected A-listed and H-listed Stocks Funds must return to origin; No lock up period Transactions in USD and other foreign currencies Allocated to each institutional investor RMB denominated products approved by CSRC Funds subject to lock up period and can stay in mainland afterwards Transactions in RMB Allocated to offshore regions RMB denominated products approved by CSRC Funds subject to lock up period and can stay in mainland afterwards 4

6 Eligible Stocks for Shenzhen Northbound Trading (SZ Connect) Constituent stock of the SZSE Component Index with a market capitalization of at least RMB 6bn* (499). Constituent stock of the SZSE Small/Mid Cap Innovation Index with a market capitalization of at least RMB 6bn* (377). A-listed stock that is not included in the above indices but is dual listed in H-share market (5). *The criterion of market capitalization will only be applied during periodic adjustment of constituents of relevant indices. The review period and calculation method are consistent with the periodic adjustment of constituents of relevant indices. The market capitalization of eligible shares for SZ Connect is calculated using the average daily market capitalization of A shares in the 6 months prior to the deadline for periodic review of the relevant index. 5

7 Features of Eligible Stocks SZ Connect covers selected stocks listed on SZSE Main Board(267), SME Board(411) and ChiNext market (203), highlighting SZSE s characteristics as a gathering place of emerging industries with the distinctive feature of growth and providing the Mainland and overseas investors with more diversified investment choices. Breakdown by sector 1.81% 21.44% 17.74% 14.92% 12.07% 10.84% 8.76% 7.74% 3.24% 1.44% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Information Technology Consumer Discretionary Industrials Financials Materials Health Care Consumer Staples Telecommunication Services Utilities Energy 6

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9 Committed to developing multi-tiered capital market system Offering investment opportunities in innovative and growth sectors in China Offering a liquid marketplace for a diversified investment community SZSE Founded B-Shares SME Board Mutual Recognition of Funds (MRF) QFII Launched OTC Market ChiNext Market SZ-HK Stock Connect 8

10 Main Board Launched on Dec.1,1990 No. of listed companies: 478 Total market cap: USD 1067bn Average market cap: USD 2. 25bn SME Board Launched on May.17, 2004 No. of listed companies: 802 Total market cap: USD 1.4trn Average market cap: USD 1.8bn ChiNext Market Launched on Oct.30, 2009 No. of listed companies: 541 Total market cap: USD 789bn Average market cap: USD 1.5bn Competitive blue chips Niche champions Innovation and entrepreneurship 9

11 The SZSE consists of the Main Board, the SME Board and the ChiNext Market. They serve companies at different developing stages and offer investors diversified portfolio. Breakdown of market share 27% 29% 24% 44% 43% 45% 28% 28% 32% Inner: Market Cap Middle: Listed Companies Outside: Trading Value Main Board SME Board ChiNext Market 10

12 Items Main Board & SME Board Criteria I ChiNext Market Criteria II Net Profit positive in the last 3 consecutive years and the aggregate profit >= RMB 30 million (USD 4.6 million) positive in the past 2 consecutive years and the aggregate profit >=RMB 10 million (USD 1.5 million) positive in last year Revenue/ Cash Flow accumulated revenue in past 3 years >=RMB 300 million (USD 45.6 million), or with accumulative net operating cash flow >=RMB 50 million (USD 7.6 million) -- revenue in last year >=RMB 50 million (USD 7.6 million) There is no transfer mechanism between ChiNext Market to other market. 11

13 After over 2 decades of development, SZSE s market capitalization, number of listed companies and trading value rank at forefront among stock exchanges in the world. Number of Listed Companies 1761 listed companies No.12 No.7 Market Capitalization USD 3.2 trillion Funds Raised by Equity USD85.5 billion No.2 No.3 Trading Value USD 6.1 trillion in 2016Q3 12

14 Market structure by sector and issuers ownership of Shenzhen market are different but complementary to other market. Shenzhen market Shanghai market 4% 20% 18% 10% 19% Breakdown of market cap by sector 8% 16% 34% 13% 10% 4% 6% 8% 1% 5% 7% 3% 2% 1% 10% A-share market 12% 18% 13% 10% 23% 6% 6% 2% 3% 6% 0% 20% 40% 60% 80% 100% Information Technology Industrials Consumer Discretionary Materials Financials Health Care Consumer Staples Telecommunication Services Utilities Energy Shenzhen market Shanghai market A-share market Breakdown of listed companies number by ownership structure 46% 66% 78% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 54% 34% 22% non-soes SOEs 13

15 IT 196 listed companies 78% of this industry 146 can be traded through SZ Connect High-end manufacturing 73 listed companies 70% of this industry 78 can be traded through SZ Connect Green industry 172 listed companies 76% of this industry 91 can be traded through SZ Connect Chinese economy s new dynamics Healthcare 85 listed companies 78% of this industry 59 can be traded through SZ Connect Consumption 385 listed companies 57% of listed this industry 166 can be traded through SZ Connect Culture 66 listed companies 64% of this industry 34 can be traded through SZ Connect 14

16 Industrials: Technical Progress And Industrial Upgrading 400+ listed companies in SZSE ZOOMLION(000157) Among world s best in concrete machinery and hoisting machinery CIMC(000039) Leading logistics and energy equipment supplier in the world Financials: Horizontal Expansion 80+ listed companies in SZSE Ping An Bank (000001) The pioneer of the commercial banks of China Bank of Ningbo (002142) Lowest ratio of non-performing loans in the sector Shenwan Hongyuan (000166) Largest securities company in China VANKE-A(000002) Largest real estate developer in China Consumer Industry: Sustainable Growth 370+ listed companies in SZSE GREE(000651) World s largest air conditioning manufacturer Chongqing Changan Automobile (000625) Largest domestic automobile producer in China Yunnan Baiyao (000538) Leading Chinese herbal medicine producer with history over one hundred years WULIANGYE(000858) Largest producer of Chinese liquors CHANGYU(000869) Largest winery in Asia Shenzhen Overseas Chinese Town (000069) Domestic leader in tourism and culture industry 15

17 700 issuers in strategic emerging industries IT is Good: Internet listed companies in SZSE Eastmoney(300059) Online finance, wealth management and fund distribution Flytech (002230) The largest voice tech company in Asia Kingsun Science and Technology (300235) Online education solution High-End Equipment Manufacturing: Made in China 2025 Han s Laser (002008) Precise technology, the largest laser application company in China Hikvision (002415) Largest surveillance system manufacturer Ofilm (002456) Largest smart mobile phone screen manufacturer Tgood (300001) Provides power transformer and distribution system for high-speed rail. Green Industry 180+ listed companies in SZSE BYD (002594) World largest new energy vehicle manufacturer Gold Wind (002202) World largest wind power developer and manufacturer Biomedicine and General Medical Services 100+ listed companies in SZSE Lepu Medical (300003) Develops and produces cardiovascular disease diagnosis and treatment equipment Culture and Entertainment Industry 95 listed companies in SZSE Wanda Cinema Line (002739) The largest cinema operator in both China and the US Hunan TV (000917) Leading cable network and media content provider 16

18 More than two decades of experience. Trusted benchmarks of multi-tiered SZSE market. Display unique characteristics of SZSE securities. Help investors tracking the fast-growing market. Shenzhen Securities Information Co., Ltd. (SSIC), a wholly-owned subsidiary of SZSE, is authorized by SZSE to develop, operate and market the SZSE INDEX. 17

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21 Index investment is the best solution for overseas investors tracking the benefits of high growth in Shenzhen market. Investment Diversification Offering perfect complementary investment instruments to those blue-chips and large caps A-share indices, e.g. FTSE A50, CSI300. Transparent & Rules-based Rules-based index methodology, periodic reviews, constituents information are public. Risk diversification Invest in a basket of high quality ChiNext listed companies rather than some stock you have no idea about. Efficient & Reliable All the real time indices are calculated and disseminated by Shenzhen Stock Exchange and available in terminals of international data vendors. 20

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23 The SZSE Component Index is designed to measure the performance of the 500 largest and most liquid A-share stocks listed and trading on the Shenzhen Stock Exchange. Quick Facts SZSE Code ISIN Bloomberg Ticker Reuters RIC No of Constituents Review Frequency CNM C8 SICOM.SZSC1 500 Semi-annually Base Value 1000 as of July 20,1994 Methodology Construction Universe: To be included in the index, a security must be listed on Shenzhen Stock Exchange for more than 6 months. ST or *ST stocks are excluded from the index universe. Selection: Based on a 1:1:1 weighted average of the three measures: full market capitalization, free-float market capitalization, and turnover. Weighting: Actual value of constituent s free float market capitalization. 22

24 China market Market positioning U.S. market SZSE Component Index The representative of innovation sectors NASDAQ Composite CSI 300 SSE Composite Index The most influential large-cap and blue chips index The earliest and widely used stock index S&P 500 Dow Jones Industrial Average 23

25 Large contribution from Information Technology Sector sets the index different from other large cap A-share indices. Breakdown of market cap by sector SSE 50 CSI300 SZSE Component Index Nasdaq Composite 9% 23% 43% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Information Technology Industrials Consumer Discretionary Financials Materials Health Care Consumer Staples Telecommunication Services Utilities Energy 24

26 Moderate-size Market Capitalization(USD billion) Constituent Weight Index Full Free float Average Largest Smallest Largest Smallest SZSE Component Index % 0.07% SSE % 0.43% CSI % 0.02% High-growth Index ROE(2016Q3) Dividend Yield (2015Q3-2016Q3) Compound Growth Rate of Net Income ( ) Compound Growth Rate of Net Income (2016E-2018E) SZSE Component Index 7.97% 1.02% 20.02% 23.51% SSE % 3.18% 6.69% 4.24% CSI % 2.41% 8.49% 6.76% 25

27 The index represents approximately 55% of the total market capitalization of Shenzhen securities. Market Share of SZSE Component Index Constituents (as percentage of all the Shenzhen A-shares) 90% 60% 30% 55% 58% 44% 64% 74% 0% Total Market Cap Free Float Market Cap Value of Trading Operating Income of Constituents Net Income of Constituents 26

28 The constituents allocation is closely in sync with the continually growing market by absorbing more and more SME board and ChiNext companies. Breakdown of market cap by board SZSE Component Index SZSE listed companies 19% 42% 23% 35% Main Board SME Board 39% 42% ChiNext Market 27

29 227 or 45% constituents are engaged in National Strategic Emerging Industries New Information Technology 97 Green Industry Biotechnology High-End Equipment Manufacturing 26 Alternative Energy New Materials New-energy Vehicles

30 Constituents are full of market leaders and innovative enterprises 360 or 72% of constituents are non-soes. Home to companies on the forefront of innovation and gathering strength in the capital market. Traditional Industries Leaders Innovative Enterprises 140 Total Market Cap of GREE (RMB billion)

31 Applied to rules-based index methodology, constituents are screened, selected and weighted to ensure the index is investable and tradable. The index is designed for use in the creation of index tracking funds, derivatives and performance benchmark. Free-float % Free-float market Cap ETFs Index level On average Smallest Smallest 44% 49% 6% 0.39 (USD billion) SZSE Component Index OTC Index Funds Index Structured Funds 30

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33 The SZSE Small/Mid Cap Innovation Index is designed to represent the performance of the small and middle-cap segment as well as those fast-growing and innovative listed companies of Shenzhen market. Quick Facts SZSE Code ISIN Bloomberg Ticker Reuters RIC No of Constituents Review Frequency CNM100002KC9 SZ SZSESCI 500 Semi-annually Base Value 1000 as of Dec 30,2011 Methodology Construction Within the index universe of SZSE1000, the rest 500 securities after the 500 constituents of SZSE Component Index comprise of the SZSE Small/Mid Cap Innovation Index. SZSE 1000 SZSE Component Index (500 constituents) SZSE Small/Mid Cap. Innovation Index (500 constituents) 32

34 High return, high volatility, high risk adjusted return Cumulative index performance (2012- Oct ) 400% 300% 200% SZSE Small/Mid Cap Innovation Index CSI % 0% -100% 12/ / / / / / / / / /2016 Index performance, risk and return characteristics (2012- Oct ) Index Return Annualized Return Annualized Std Dev Sharpe Ratio SZSE Small/Mid Cap Innovation Index % 24.31% 30.84% 0.54 CSI % 7.13% 26.08%

35 Adequate liquidity and investability Index SZSE Small/Mid Cap Innovation Index Turnover (Daily Average) Value (USD billion) Free-float % Free-float market Cap (USD billion) Ratio Index level Average Smallest Smallest Average Median % 43.18% 48.56% 4.7% High valuation supported by high growth 2.14 P/E(LYR) GAGR of Net Income (2016E-2018E) % 0.61 PEG % SZSE Small/Mid Cap Innovation CSI300 SZSE Small/Mid Cap Innovation CSI

36 SME board and ChiNext market listed constituents account for 70%+ R&D expenditures accounts for 4.41% of operating income Breakdown of market cap by board and sector 4% 3% 2% Industrials 4% Information Technology 29% 21% 50% SME Board ChiNext Market Main Board 8% 6% 17% 21% 18% Materials Consumer Discretionary Health Care Consumer Staples Telecommunication services Financials 17% Energy Utilities 35

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38 Fast-growing blue-chip index Represent the performance of Shenzhen large-cap segment Balanced sector allocation, the top 3 sectors are Financials, IT and Consumer Discretionary. A variety of linked index products including ETFs, structured index funds, LOFs and OTC index funds. SZSE Code Breakdown of market cap by sector ISIN Bloomberg Ticker Reuters RIC CNM G5 SZ SZS100PI 8% 6% 4% 3% Financials Information Technology 24% Consumer Discretionary Industrials No of Constituents % Consumer Staples Materials Average Market Cap 7.68 USD billion 21% Health Care Average Free-float Market Cap 3.43 USD billion 21% Telecommunication Services Utilities 37

39 Offering exposure to China s high quality SMEs Fostering niche market leaders Remarkable historical performance, 11yr-annualized return of 19% since June 2005 Reasonable P/E ratio ( 35), high growth potential supported by high ROE (12%) SZSE Code ISIN CNM B6 Bloomberg Ticker SZ Reuters RIC.SZSMEP No of Constituents 100 Breakdown of market cap by sector 3% 1% Information Technology Industrials 6% Materials 9% 30% Consumer Discretionary Health Care 10% Financials Average Market Cap Average Free-float Market Cap 4.57 USD billion 1.86 USD billion 13% 14% 14% Consumer Staples Telecommunication Services Energy 38

40 Barometer of China s innovative sectors 90% constituents are state-certified high-tech enterprises,80% from strategic emerging industries Neither secondary board nor tiny market. Constituents are of high quality in adequate liquidity, profitability and growth potentiality. A relatively low correlation to other major A-share indices in historical performance. SZSE Code ISIN Bloomberg Ticker Reuters RIC CNM100002K13 SZ CHINEXTP No of Constituents 100 Average Market Cap Average Free-float Market Cap 3.16 USD billion 1.39 USD billion Breakdown of market cap by sector 10% 12% 2% 2% 9% 16% 48% Information Technology Industrials Health Care Consumer Discretionary Telecommunication Services Materials Consumer Staples 39

41 The indices are licensed to over 30 domestic and overseas fund issuers as underlying indices for ETPs and passively-managed investment funds. As of the end of October , 82 index products with total net assets value around USD 12billion ETFs Index Structured Products LOFs We provide services of Index licensing Index data licensing Bond valuation service Overseas listed ETPs Custom indices, co-brand OTC Index Funds Financial Plans indices, index calculation agency 40

42 INDEX FUND NAME UNDERLYING INDEX FUND MANAGER LISTED/LAUNCHED MARKET Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) SME-ChiNext 100 Index Van Eck Global NYSE Arca CSOP SZSE ChiNext ETF ChiNext Index COSP Asset Management Hong Kong Stock Exchange Fubon SZSE 100 ETF SZSE 100 Index Fubon Asset Management Taiwan Stock Exchange Capital Investment SZSE SME ETF SME Index Capital Investment Trust Corporation Taiwan Stock Exchange QV ChiNext ETN ChiNext Index NH Investment & Securities Korea Stock Exchange Mirae Asset China SZSE 100 Index Equity Master Investment Trust SZSE 100 Index Mirae Asset Global Investments Korea KODEX ChiNext ETF ChiNext Index Sam Sung Asset Management Korea Stock Exchange ARIRANG ChiNext ETF ChiNext Index Hanwha Asset Management Korea Stock Exchange Mirae Asset China Shenzhen 100 ETN SZSE 100 Index Mirae Asset Securities Korea Stock Exchange 41

43 SSIC was been honored The Best Index Provider for ETF-China Domestic award in The Asset Triple A Asia ETF Awards We build close relationship and explore collaborative opportunities with international financial institutions and exchanges. 42

44 This document has been compiled by the Shenzhen Securities Information Co., Ltd. ( SSIC ) for information purpose only. SSIC has attempted to ensure that the information in this document is accurate, but is not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of the document or any of the information in it. No responsibility or liability can be accepted by Shenzhen Stock Exchange or SSIC for any errors or for any loss from use of this publication or any of the information or data contained herein. Past performance is no guarantee of future results. 43

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