Over the past two decades, the Chinese economy and equity markets have substantially increased in size and prominence. During this period, China embarked on a major transition from a manufacturing-led economy, reliant on the traditional industrial and banking sectors, to a more mature consumer and service-oriented economy. In parallel, the country’s equity market has become more diversified, as consumer and technology-oriented companies now represent a large share of China’s equity market.
Introduced in 1997, the S&P China Broad Market Index (BMI) is designed to represent the full investable opportunity set of Chinese equities. By maintaining eligibility for large, mid, and small caps, as well as all Chinese share classes, the index enjoys an advantage compared to several popular Chinese equity benchmarks that cover narrower segments of the market. Leveraging the well-established methodology used in the underlying S&P Global BMI, the framework is consistent, modular, and allows pairing with other global regions without gaps or overlaps.
In this overview we will cover the following key points.
- As the world’s second-largest equity market and representing over 35% of emerging market equities, China is highly relevant to market participants, and has grown steadily over the past several decades.
- Improved access to onshore-listed A-shares has allowed for greater inclusion in equity benchmarks, significantly increasing the investable opportunity set.
- The S&P China BMI provides potential advantages over peer indices since it includes large-, mid-, and small-cap companies, A-shares, and offshore-listed companies, and it enjoys a long track record dating back to the mid-1990s.
CHINA MATTERS
Between Dec. 30, 1994, and Dec. 31, 2021, China's representation within global benchmarks grew considerably, increasing from less than a 0.1% share in the S&P Global BMI to nearly 4% today. Meanwhile, its share of emerging market benchmarks swelled to 35.5% of the S&P Emerging BMI (see Exhibit 1).
