China’s A-share market indices undergo adjustments, reflecting new economic patterns

China's A-share market saw adjustments to multiple stock indices on Monday. The changes, spanning Shanghai, Shenzhen, and Beijing stock exchanges, underscore the growing prominence of high-tech companies in the new indices, as investor sentiment continues to favor the sector.

Notably, the Shenzhen Component Index will replace 19 constituent stocks, while the Nasdaq-like ChiNext Index will see changes to seven stocks, and the Shenzhen 100 Index will replace six companies.

Recently, FTSE Russell also announced quarterly changes to its FTSE China A50 Index, which will take effect after the close of market trading on Friday, with NAURA Technology replacing Huaneng Hydropower Co.

Stock indices are designed to track the performance of the stock market by compiling a set of representative stocks. The adjustments reflect shifts in the market's underlying composition, with the affected indices being some of the most widely traded in the market, Wang Yu, an analyst at Donghai Securities, told the Global Times on Monday.

The rebalancing of the indices reflects changes in the market value of the constituent stocks, offering some insight into the evolving dynamics of the Chinese economy.

For instance, technology stocks related to the low-altitude economy, such as CITIC Offshore Helicopter Co and Shanghai Huace Navigation Co, were added to the Shenzhen Component Index. The change highlights the growing investor confidence in these companies, which also mirrors the development of the low-altitude economy, Wang said.

Overall, investors are putting more weight on technology stocks and high-tech manufacturing companies, with the market value of listed companies rapidly rising. In contrast, more housing developers were taken out of the indices, illustrating the transformation of China's economy, Wang added.

The Shenzhen Component Index, known for its heavy weighting placed on the manufacturing sector, has undergone structural optimization, according to a report by 21Jingji.com. Manufacturing companies now account for more than 70 percent of the index's weight, with 222 firms in the advanced manufacturing sector.

As a result of these adjustments, the Shenzhen market's core index structure has been improved, with a stronger focus on the so-called new growth drivers. The constituent companies are also strengthening their core competitiveness, contributing to steady growth in profitability, said 21Jingji.com.

For the ChiNext Index, the weight of strategic emerging industries has reached 92 percent, with new-generation information technology stocks making up a significant 33 percent, electric vehicles accounting for 23 percent, and 15 percent from the biotechnology sector, the report added.

On Monday, Fu Linghui, a spokesperson for the National Bureau of Statistics, highlighted that the capital market had shown significant improvement in October, buoyed by a package of pro-growth government policies. November continued to see positive developments, with stock trading volume in the Shanghai and Shenzhen bourses both rising by around 1.1 times compared to a year earlier.