What is the SSE Composite Total Return Index?
The SSE Composite Total Return Index (SSE TR), a derivative of the Shanghai Stock Exchange Composite Index, constitutes a basket of eligible stocks and depositary receipts listed on the Shanghai Stock Exchange (SSE).
This index integrates the dividends distributed by these securities into its total return, offering a comprehensive view of the post-dividend performance of SSE-listed companies. Initiated on July 21, 2020, with an initial base value of 3320.89 points, it endeavors to mirror the holistic performance of these corporations, inclusive of their dividend yields.
Assigned the code 000888, it is colloquially known as “SSE Total Return” or abbreviated as “SSE TR.”
Differences in Calculation and Focus between SSE Composite Total Return Index and SSE Composite Index
Price vs Price + Dividends
The primary differences between the SSE Composite Total Return Index and the SSE Composite Index reside in their calculation methodologies and emphases. The SSE Composite Index fundamentally evaluates performance based exclusively on market price fluctuations. In stark contrast, the SSE Composite Total Return Index adopts a more holistic approach, factoring in the reinvested dividends of constituent stocks in addition to price movements, thereby providing a more precise depiction of investors’ actual returns.
Furthermore, the SSE Composite Total Return Index boasts more intricate and nuanced regulations concerning diverse aspects, including the timing of the inclusion of newly listed stocks and the handling of securities subject to risk warnings, further enhancing its modernity and scientific rigor.
Inclusion Criteria for Newly Listed Stocks
The SSE Composite Total Return Index imposes specific inclusion criteria for newly listed stocks.
Securities that rank among the top 10 in terms of average daily total market capitalization since their listing on the Shanghai Stock Exchange are eligible for inclusion in the index three months after their initial public offering (IPO).
In contrast, other securities are considered for inclusion only after they have completed a full year of trading.
This methodology is designed to mitigate the inherent volatility of newly listed stocks during their early stages, ensuring that only those with a demonstrated market presence and performance are incorporated, thereby enhancing the index’s stability and representativeness.
Handling of Risk-Warned Securities
The SSE Composite Total Return Index adheres to a precise exclusion and reinstatement protocol for risk-warned securities, including ST and *ST securities.
Securities that are subjected to risk warning measures are immediately excluded from the index’s composition effective from the trading day immediately following the second Friday of the month subsequent to the implementation of such measures.
Conversely, securities whose risk warning status is revoked are reinstated into the index on the trading day subsequent to the second Friday of the month following the revocation.
This approach ensures the integrity of the index’s constituents, mitigating potential adverse effects on the index’s overall performance arising from deteriorating securities, and providing investors with a clearer and more refined market benchmark.
The Significance of the SSE Composite Total Return Index
The introduction of the SSE Composite Total Return Index addresses a pivotal limitation of the SSE Composite Index, which previously failed to encapsulate dividend income, thereby presenting investors with a more comprehensive and authentic portrayal of market returns.
Significantly, the incorporation of dividends into the index can markedly reshape its performance. A comparative analysis between the SSE Dividend Index and its total return counterpart, both of which track performance from December 31, 2007, divulges an astonishing 112% discrepancy in returns, emphasizing the profound impact dividends have on investors’ portfolios.
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