Introduction
The S&P China A MidCap 500 Index seeks to provide representative exposure to mid-sized China A-shares while requiring positive earnings for index constituents and excluding sanctioned securities. The index composition provides differentiated exposure when compared to the large-cap-focused S&P China A 300 Index due to the unique characteristics of the mid-cap size category.
In this overview, we will explore why one may want to consider mid-cap China A-shares, including:
- Their limited representation in conventional China and emerging market benchmarks;
- The size and scope of the opportunity set;
- Differentiated investment characteristics and high return dispersion compared to large-cap A-shares; and
- A combination of both large-cap and mid-cap exposure provides broader coverage across sectors.
The methodology of the S&P China A MidCap 500 Index offers some additional potential benefits, including:
- A profitability requirement to eliminate companies lacking a track record of generating positive earnings; and
- The exclusion of sanctioned securities.
The Size and Scope of China A-Shares
While Chinese equities have grown in importance for international market participants, A-shares are limited to partial inclusion factors within broad benchmarks, leaving them significantly underrepresented in conventional Chinese and emerging market indices. Without representative inclusion of A-shares, China-specific exposure within indices could be considered incomplete.
