BEIJING, July 22 (Xinhua) -- The adjusted Shanghai Composite Index that came into effect Wednesday will better reveal structural changes in the Shanghai bourse to provide an ideal benchmark for investors to observe market operations, the China Securities Journal reported, citing analysts.
In June, the Shanghai Stock Exchange had announced that it will adjust the calculation methodology of the benchmark index.
Launched in 1991 as the first stock index in the A-share market, "the Shanghai Composite Index is the oldest, most recognized and most frequently used index in the securities market by investors to represent average market returns," said Yan Jiawei, an analyst with Huaan Securities.
However, as the number of shares in the market increased and the stock fundamentals diversified, the original calculation failed to reflect overall stock market performance, Yan said.
To ensure stability of the index, the new calculation scheme will remove stocks that receive a risk warning from the stock exchange.
Meanwhile, the benchmark index will include stocks listed on China's Nasdaq-style sci-tech innovation board, known as the STAR, as well as red chip companies, or companies registered overseas but operating on the Chinese mainland, to ensure it is more representative.
From a long-term perspective, the optimization is intended to restore the authenticity of the index, instead of aiming at its growth, Dong Dengxin, head of a financial research institute under Wuhan University of Science and Technology, told the journal.
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