My Fintech Empire

The calculation methods of the two indices, SGX 500 and SGX 1000, are both calculated by weighted average. Specifically, there are four points.

The first is the selection of samples. The calculation method is based on a basket of stocks. The selection of sample stocks is based on multiple factors, including market value, liquidity and industry distribution.

The second is the weighting of the circulating market value. The weighted average method used by these two indices is the weighting of the circulating market value, that is, the weight of each stock is the product of its number of circulating shares and the stock price. Larger companies account for a larger proportion in the index.

The second is to adjust the stock weights. Due to the fluctuation of stock prices and changes in corporate market value, these two indices need to be adjusted regularly, and adjustments are made once a quarter.

The fourth is the sum of returns. The calculation of the two indices is based on the return rate, that is, considering the changes in stock prices and dividend payments, by summing up the returns of each stock, the return rate of the entire index is obtained.

With the launch of these three indices, the SGX market will also further improve the market value matching mechanism.

By then, there will be the SGX Composite Index representing the entire SGX market, the SGX 50 Index representing the super large-cap stocks in the SGX market, the SGX 500 Index representing the mid-large-cap stocks in the SGX market, and the SGX 1000 Index representing the small-cap stocks in the SGX market.

The SGX market defines and distinguishes super large-cap stocks, large-cap stocks, mid-cap stocks and small-cap stocks mainly based on the circulating market value, rather than the total market value or total share capital.

Stocks with a circulating market value of more than 200 billion are considered super large-cap stocks, and the circulating market value is 200 billion, and the total market value is often more than 500 billion, which is a true super large-cap stock.

Then, stocks with a circulating market value of more than 50 billion and less than 100 billion are considered large-cap stocks, stocks with a circulating market value of more than 10 billion and less than 50 billion are considered mid-cap stocks, and stocks with a circulating market value of less than 10 billion are considered small-cap stocks.

The 500 constituent stocks in the SGX 500 Index have a circulation market value of more than 10 billion and less than 200 billion. It is an index that combines large-cap stocks and mid-cap stocks, because there is no need to come up with an additional large-cap index. If they are separated, neither index is enough.

The 1000 constituent stocks in the SGX 1000 Index are all stocks with a circulation market value of less than 10 billion.

On this basis, the SGX market will also launch a large number of ETFs, including ETFs corresponding to the three new indexes, namely the SGX Composite Index ETF, SGX 500 ETF, and SGX 1000 ETF.

After these three new ETF varieties are listed, funds will no longer have to crowd into the SGX 50 ETF and the 50 super large-cap stocks. At that time, they will inevitably be diverted to provide more liquidity support for large-cap stocks, mid-cap stocks, and small-cap stocks in the SGX market.

In addition to the four major stock indexes that have corresponding ETFs, more industry ETFs will be launched, and the holdings can only be stocks in the SGX market, and there cannot be stocks in the two neighboring cities. Even if the stock is the industry leader, it cannot be selected if it is not listed on the SGX.

In this meeting, 10 industry ETF varieties have been confirmed to be launched, namely chip ETF, medical ETF, pharmaceutical ETF, Internet ETF, media ETF, new energy vehicle ETF, photovoltaic ETF, software ETF, game ETF, and artificial intelligence ETF.

From the perspective of these 10 major ETF varieties, the biggest feature is that they are all technology industries and sunrise industries. There are no wine ETFs, consumer ETFs, securities ETFs, etc. in the SGX market because companies in these industries cannot be listed on the SGX market.

More than 95% of the listed companies in this market are technology stocks. The SGX market is the concentration of technology stocks in the A-share market, and they are all sunrise industries. The listed companies themselves are very strong in their own industry segments, and they are even leading level, otherwise they dare not easily go to the SGX market to list.

Because there is a strict compensation mechanism for delisting in the SGX market. It does not mean that you can come here to list and raise funds, and then you can delist and leave without any cost.

As a concentration of technology stocks, the industry ETFs launched are naturally related to technology.

This reform, the launch of three new indexes and a large number of ETFs, is not only to solve the "top-heavy" problem currently facing the SGX market, but also to solve the problem of being indirectly sucked by the two neighboring markets.

When these large numbers of ETF varieties are listed, and the holdings can only hold stocks in the SGX market, it will have a huge impact on those active public funds.

Because investors have more investment varieties and choices.

The current situation is that many stockholders want to invest in an industry. For example, some people are optimistic about the chip industry, but do not want to buy a single stock themselves, or want to buy individual stocks but cannot reach the threshold of the SGX market. Such investors hope to have a chip ETF. The same logic applies to those who are optimistic about other industries and want to invest in industry ETFs.

Including those who want to invest in small-cap stocks, there is no small-cap ETF at present. After the SGX 1000 ETF is released, you can invest directly.

These ETFs are not available now, so we can only be cheated and let the financial rentiers take advantage of the information gap.

With these ETFs, it is like a magic mirror that can expose the true colors of active funds. In the future, a fund managed by a certain fund manager will appear. This fund mainly allocates chip stocks. When investors see that the chip ETF has risen by +50%, while this fund has only risen by +10% or even lower during the same period, seriously underperforming the industry ETF, then the investors will definitely see that their defenses have been broken.

After the defenses have been broken, they will definitely redeem the fund in anger, and then buy ETFs themselves. If they cannot buy on-exchange ETFs without opening an account, they will buy over-the-counter ETF links. They will never touch any active funds again, and will never trust those fund managers again.

Now, because the SGX market has not launched corresponding industry ETFs, many investors have no reference. In addition, due to the disadvantage of information asymmetry, they don’t know whether the fund they bought is really bad, or the fund manager is too bad or secretly cheated.

But in the future, with the launch of the SGX Composite Index, SGX 500 and SGX 1000 Index, and with the launch of a large number of ETFs, the current situation will definitely usher in a huge change.

Fang Hong also didn't want these financial rentiers to suck blood too hard and too comfortably. Think about it, he harvested 3.13 trillion US dollars of wealth outside, fought with the Shua Group in various ways, and made money and returned more than 5 trillion yuan to the SGX market, pushing up the stock market, but let these people indirectly suck blood and enjoy the fruits of their labor. It's not pleasant to think about it.

In the two neighboring cities, the Shanghai Composite Index can still top above 3,400 points, and the Shenzhen Component Index can top above 14,000 points. To a large extent, it is the mixed funds run by these institutions. They allocate a part of the stocks in the SGX market, cash out after making a profit, and then go to the two neighboring cities to take over the junk stocks at high prices, instead of benefiting the investors, or only giving the investors a little dregs. More than 90% of them have been harvested by financial rentiers.

Fang Hong asked the Qunxing Group to take out 5 trillion to enter the SGX market to go long, and those people took the opportunity to cash out. Of the 5 trillion, there must be a part of them that took over their orders, which is why they can indirectly suck the blood of the SGX market.

However, their days of indirectly sucking blood from the SGX market in this comfortable way will not last long. Next year, new indexes and a large number of industry ETFs will be launched, which will be the beginning of the end of those people's good days.

By then, 2021 will be the beginning of the turn of the two neighboring cities into a bear market, and the Shanghai Composite Index will return to below 3,000 points. This is inevitable, because after the implementation of a new round of reforms in the SGX market, it is equivalent to pulling out all the tubes that these financial rentiers have pierced into the SGX to suck blood.

How can you grow taller if you can no longer absorb nutrients? You will definitely starve to death, and the reaction will be that the two neighboring cities will enter a bear market again and begin to enter a bear market stage of endless decline. (End of this chapter)