'500' index to have marked effect on bourse

“The CSI Cross-Straits 500 Index is a natural by-product of the emerging economic might of the Greater China market. The positive effect it will have on Taiwan's bourse will be more immediate and clear than that of the QDIIs,” said Brian Wu, director of China Economic International Assets Management Company.

The index, to be launched on Jan. 18 by China Securities Index Co., a joint venture of China's main stock exchanges in Shanghai and Shenzhen, will be comprised by the 300 companies in China's Hushen 300 Index, the 100 companies in the CSI Hong Kong 100 Index, and 100 leading companies from Taiwan's stock exchange.

China's qualified domestic institutional investors (QDIIs) will be allowed to invest up to an estimated US$30 billion in Taiwan's stock market starting Jan.16 after the two sides initialed memorandums of understanding on financial supervisory cooperation in November.

The opening of Taiwan's stock market to Chinese QDIIs was expected to give it added momentum, but Wu contended that the 500 index will have a bigger impact because while QDIIs have the option of “buying” or “not buying” shares in Taiwan, the CSI Cross-Straits 500 will be a “must buy” for international funds.

Wu also expected that investment institutions will create various financial instruments linked to the new index.

Taiwan's overall market index, the Taiex, should benefit because many of the Taiwanese companies in the index that will be pursued by additional funds are weighted stocks on the Taiex, Wu said.

CSI will publish the index in Chinese Yuan, U.S. dollars, Hong Kong dollars and Taiwan dollars, and the 500 companies will have a combined market value of around US$468.5 billion.

This covers 75 percent of the total market capitalization of the stock markets in China, Hong Kong and Taiwan, and 53 percent of the combined trading volume.

Wu also assessed trends in the Greater China region, saying that economic growth is being driven by two factors — capital accumulation and population concentration — and China is representative of this trend.

In terms of investment, Wu predicted that in light of China's demand, shares related to infrastructure development, daily consumption, retailing, financial services, energy and biotechnology, and medical care are relatively favorable.

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