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Tracking the Benefits of Growth
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I. Introduction of the SZ-HK Stock Connect
II. Key Features of Shenzhen Stock Market
III. Universe of SZ-HK Stock Connect
IV. Flagships of SZSE Index Family
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At this stage, Shenzhen Northbound Connect is
restricted to a range of eligible stocks. The
universe is constituents of SZSE Component
Index and SZSE Small/Mid Cap Innovation
Index with a market capitalization of at least
RMB 6 billion, and SZSE-SEHK A+H shares.
Eligible Stocks for Northbound Trading
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1990 1992 2002 2004 2006 2009 2015 2016
SZSE
Founded B-Shares
SME
Board
OTC Market ChiNext Market
Mutual Recognition of Funds
(MRF)
QFII
Launched SZ-HK Stock Connect
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
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• Trading Value • USD 19 trillion in
2015
• USD 2.9 trillion YTD
• Daily Turnover
• 4.79% in SZ
Market
• Market Capitalization
• USD 3.09 trillion
• Number of Listed Companies
• 1761 listed
companies No.12 No.7
No.4 No.1
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.
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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.
32%
44%
24%
27%
44%
29%
28%
44%
28%
Main Board SME Board ChiNext Market
Main Board SME Board ChiNext
Market
Launch Date Dec.1,1990 May.17,2004 Oct.30,2009
Services
Group
Market- driven
blue chips
Niche
champions
High-tech
enterprises
Market Cap USD 0.99
trillion
USD 1.36
trillion
USD 712.9
billion
Listed
Companies 478 784 504
Average
Market Cap USD 2.1 billion
USD 1.7
billion
USD 1.4
billion
Free Float 80.9% 67.3% 58.3%
Inner: Market Cap
Middle: Listed
Companies
Outside: Trading
Value
Breakdown of market share
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66%
46%
78%
34%
54%
22%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
A-share market
Shanghai market
Shenzhen market
non-SOEs
SOEs
Breakdown of listed companies number by ownership structure
Breakdown of market cap by sector
Market structure by sector and issuers’ ownership of Shenzhen market are different but complementary
to other market.
12%
4%
20%
18%
18%
19%
13%
10%
16%
10%
8%
13%
23%
34%
10%
6%
4%
8%
6%
6%
7%
2%
1%
3%
3%
5%
2%
6%
10%
1%
0% 20% 40% 60% 80% 100%
A-share market
Shanghai market
Shenzhen market
Information Technology Industrials Consumer Discretionary Materials
Financials Health Care Consumer Staples Telecommunication Services
Utilities Energy
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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
Consumer Industry: Sustainable Growth
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
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
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IT is Good: “Internet+”
220+ 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
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
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.
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
700 issuers in strategic emerging industries
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.
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SZSE Code ISIN Bloomberg
Ticker Reuters RIC
No of
Constituents
Review
Frequency Base Value
399001 CNM0000000C8 SICOM .SZSC1 500 Semi-annually 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.
Quick Facts
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.
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The representative of innovation sectors
The most influential large-cap and blue chips index
The earliest and widely used stock index
NASDAQ Composite
CSI 300
SSE Composite Index
China market U.S. market
SZSE Component Index
S&P 500
Dow Jones Industrial Average
Market positioning
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43%
22%
8%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Nasdaq Composite
SZSE Component Index
CSI300
SSE 50
Information Technology Industrials Consumer Discretionary Financials
Materials Health Care Consumer Staples Telecommunication Services
Utilities Energy
Large contribution from Information Technology Sector sets the index
different from other large cap A-share indices.
Breakdown of market cap by sector
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Moderate-size
Market Capitalization(USD billion) Constituent Weight
Index Full Free float Average Largest Smallest Largest Smallest
SZSE
Component Index 1640.90 728.06 3.28 36.07 0.62 2.72% 0.07%
SSE 50 1720.09 556.57 34.39 181.22 4.74 9.67% 0.43%
CSI 300 3298.09 1274.95 10.99 181.22 2.22 4.18% 0.02%
Index ROE(2015A) Dividend Yield
(2015A)
Growth Rate of Net
Income(2015A)
Growth Rate of Net
Income (2016E)
SZSE Component Index 10.08% 0.81% 14.42% 31.09%
SSE 50 11.83% 3.20% -3.32% 0.05%
CSI 300 11.64% 2.33% -0.35% 3.62%
High-growth
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Market Share of SZSE Component Index Constituents (as percentage of all the Shenzhen A-shares)
The index represents approximately 55% of the total market capitalization
of Shenzhen securities.
55% 58% 44%
67% 81%
0%
30%
60%
90%
Total Market Cap Free Float Market Cap Value of Trading Operating Income of Constituents
Net Income of Constituents
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Breakdown of market cap by board
The constituents allocation is closely in sync with the continually growing
market by absorbing more and more SME board and ChiNext companies.
44%
38%
18%
35%
42%
23%
Main Board
SME Board
ChiNext Market
SZSE Component Index SZSE listed companies
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227 or 45% constituents are engaged in National Strategic Emerging
Industries
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13
15
26
34
34
97
0 10 20 30 40 50 60 70 80 90 100
New-energy Vehicles
New Materials
Alternative Energy
High-End Equipment Manufacturing
Biotechnology
Green Industry
New Information Technology
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360 or 72% of constituents are non-SOEs.
Home to companies on the forefront of innovation and gathering strength in the capital
market.
0
20
40
60
80
100
120
140
2003 2005 2007 2009 2011 2013 2015
Total Market Cap of GREE (RMB billion) Traditional
Industries Leaders
Innovative
Enterprises
Constituents are full of market leaders and innovative enterprises
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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
Index level On average Smallest Smallest
44% 50% 7% 0.51 (USD billion) SZSE Component
Index
ETFs
Index Structured
Funds
OTC Index Funds
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SZSE Code ISIN Bloomberg
Ticker Reuters RIC
No of
Constituents
Review
Frequency Base Value
399015 CNM100002KC9 SZ399015 .SZSESCI 500 Semi-annually 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.
Quick Facts
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.
SZSE 1000
SZSE Component Index
(500 constituents)
SZSE Small/Mid Cap. Innovation Index
(500 constituents)
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Index Return Annualized Return Annualized Std Dev Sharpe Ratio
SZSE Small/Mid Cap
Innovation Index 165.34% 25.26% 31.79% 0.84
CSI300 34.57% 7.09% 27.15% 0.33
Index performance, risk and return characteristics (2012-2015)
High return, high volatility, high risk adjusted return
Cumulative index performance (2012-2015)
-100%
0%
100%
200%
300%
400%
12/2011 06/2012 12/2012 06/2013 12/2013 06/2014 12/2014 06/2015 12/2015
SZSE Small/Mid Cap Innovation Index
CSI300
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Adequate liquidity and investability Turnover
(Daily Average) Free-float %
Free-float market Cap
(USD billion)
Index Value
(USD billion) Ratio Index level Average Smallest Smallest Average Mean
SZSE Small/Mid Cap
Innovation Index 12 2.44% 42.79% 48.05% 8.38% 0.18 0.53 0.48
High valuation supported by high growth
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12
SZSE Small/Mid Cap Innovation
CSI300
P/E(LYR)
49%
8%
1.23
1.79
SZSE Small/Mid Cap Innovation
CSI300
CAGR of Net Income
(2016E-2018E)
PEG
27
20%
19%
18%
17%
7%
6%
5% 3% 3% 2%
Industrials
Consumer Discretionary
Materials
Information Technology
Health Care
Consumer Staples
Financials
Telecommunication Services
Energy
Utilities
50%
21%
29%
SME Board
ChiNext Market
Main Board
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
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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 399330
ISIN CNM0000002G5
Bloomberg Ticker SZ399330
Reuters RIC .SZS100PI
No of Constituents 100
Average Market Cap 7.20 USD billion
Average Free-float
Market Cap 3.27 USD billion
25%
21%
21%
10%
8%
7%
4% 3% 1%
Financials
Information Technology
Consumer Discretionary
Industrials
Consumer Staples
Materials
Health Care
Telecommunication Services
Utilities
Energy
Breakdown of market cap by sector
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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 (≈ 32), high growth potential supported by high ROE (12%)
SZSE Code 399005
ISIN CNM1000001B6
Bloomberg Ticker SZ399005
Reuters RIC .SZSMEP
No of Constituents 100
Average Market Cap 4.17 USD billion
Average Free-float
Market Cap 1.72 USD billion
29%
14%
12%
12%
11%
9%
7% 5%
1% Information Technology
Industrials
Consumer Discretionary
Health Care
Materials
Financials
Consumer Staples
Telecommunication Services
Breakdown of market cap by sector
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Barometer of China’s innovative sectors
90% constituents are state-certified high-tech enterprises,70% 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 399006
ISIN CNM100002K13
Bloomberg Ticker SZ399006
Reuters RIC .CHINEXTP
No of Constituents 100
Average Market Cap 3.17 USD billion
Average Free-float
Market Cap 1.35 USD billion
49%
17%
11%
11%
8%
2% 1% Information Technology
Industrials
Health Care
Consumer Discretionary
Telecommunication Services
Consumer Staples
Materials
Breakdown of market cap by sector
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 2016Q1, 76 index products with total net assets value around USD 11billion.
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25
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Index Structured Products
LOFs
Overseas listed ETPs
OTC Index Funds
Financial Plans
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Index licensing
Index data licensing
Bond valuation service
Custom indices, co-brand
indices, index calculation
agency
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