A-shares continue to grind bottom, but the capital inflow in the stock ETF market has been continuous, showing a trend of "buying more as it falls, buying at low prices". From January to July this year, the total inflow of ETFs in the entire market reached 420.8 billion yuan, of which 99% flowed into broad-based ETFs. Among the main broad-based indexes, the performance of the SSE 50 index is better, with a focus on "the larger the market cap, the better the performance". The SSE 50 index fund has also become a popular choice continually followed by the market. Recently, the SSE 50 ETF Tianhong (Securities Code: 530000, Subscription Code: 530003) is being issued, which is an optimal choice for investors to lay out core A-share assets.

Focus on large-cap blue chip stocks and gather core A-share assets.

The SSE 50 index selects the 50 leading stocks with the largest market capitalization and the best liquidity in the Shanghai stock market as index samples, comprehensively reflecting the overall performance of the representative leading enterprises in the Shanghai stock market.

From the perspective of industries, the SSE 50 index covers leading companies in various industries such as finance, consumer goods, and industry. Among them, the finance industry has the highest proportion, with a weight of 25.49%, and the main consumer goods and industry account for 23.41% and 12.45% respectively. Compared with other broad-based indexes, the SSE 50 index significantly overweights the two traditional core industries of finance and major consumer goods, capturing investment opportunities in high-quality leading companies.

In terms of the fundamentals of index component stocks, more than 80% of the index component stocks of the SSE 50 are mega-cap stocks (data as of August 28, 2024), these companies often have strong market competitiveness and brand influence, and historically have had high profitability and stable profit growth, providing investors with sustainable investment returns. For example, Kweichow Moutai in the consumer goods industry, Ping An Insurance and CM Bank in the finance industry, China Yangtze Power in the utility sector, Zijin Mining Group in the raw materials sector, and Jiangsu Hengrui Pharmaceuticals in the healthcare industry are all representative high-quality large-cap blue chip stocks in their respective industries. In the case of increased economic volatility and market uncertainty, these leading companies have stronger risk resistance and market adaptability, and can better resist market risks.

Top ten component stocks of SSE 50, data source: CSI Index Co., Ltd., WIND, as of August 28, 2024.

With the state-owned enterprise attribute and dividend "gene", it helps to increase the valuation of the index.

If we were to describe the investment characteristics of the SSE 50 Index in one word, we might choose "a defensive attacker in the broad-based market." As mentioned earlier, the SSE 50 Index represents the mega-cap stocks and is more favored in a weak market, highlighting its "defensive" attribute. On the other hand, under the background of state-owned enterprise reform, the combination of state-owned enterprise attribute and dividend "gene" provides it with an "attacking" attribute in the current environment.

According to recent statements from high-level sources, policies are gradually guiding state-owned enterprises to pay more attention to the intrinsic value and market performance of listed companies, to convey confidence and stabilize expectations, and to better reward investors. This is reflected in the acceleration of state-owned enterprise reform, optimization of capital structure, improvement of efficiency, mergers and reorganizations, increased research and development spending, and increased dividends, all of which provide important support for the valuation reshaping of state-owned enterprises.

The SSE 50 Index includes 22 state-owned enterprises and 30 national enterprises, accounting for 44% and 60% of the index weight, respectively. Among the major broad-based indexes, it has the highest proportion and will benefit more from the support of policies for state-owned and national enterprises and the market's reassessment of the value of these companies, further highlighting the investment value of the SSE 50 Index.

Comparison of the attributes of major broad-based index constituents, data source: CCB Fund, Wind, data as of July 26, 2024

On the other hand, the market is increasingly focusing on the value of dividends in a low interest rate environment. The large-cap and state-owned enterprise attributes of the constituents of the SSE 50 Index have a historically high dividend payout ratio and stable dividend policies, which can provide investors with stable cash inflows. At the same time, dividend reinvestment helps increase the return of the investment portfolio and also provides a certain defensive characteristic in market fluctuations, thus helping the overall performance of the index. Compared to other major broad-based indexes, the dividend yield of the SSE 50 Index is significantly higher. As of August 28th, the dividend yield of the SSE 50 Index is 3.93%, while the CSI 300 is 3.38%, CSI 500, CSI 1000, and CSI 2000 are only 2.22%, 1.79%, and 1.45% respectively.

Overall, under the background of driving by medium- and long-term estimates and the implementation of stable growth policies, the SSE 50 Index has a high allocation value. If investors also want to invest in the "big and beautiful" and become a shareholder of a mega-cap stock worth hundreds of billions, they can consider investing in the recently launched ChinaAMC Shanghai A50 ETF. This fund was launched from August 12th to August 30th, with the security code: 530000 and the subscription code: 530003. You can learn more and make a purchase on the GF Securities app.

Risk Warning: The SSE 50 index has had a return of 33.5843% (2019), 18.8501% (2020), -10.0619% (2021), -19.5177% (2022), and -11.7285% (2023) in the past 5 years. The opinions provided are for reference only and do not constitute investment advice. The market carries risks, and investments should be made with caution. Past performance of a fund does not guarantee future performance, and the performance of other funds managed by the fund manager does not guarantee the performance of this fund. Before investing in a fund, investors should carefully read the fund prospectus and contract, and consider their own risk tolerance based on factors such as investment objectives, investment horizon, and investment experience. Based on understanding the product and suitability opinion of the salesperson, make rational judgments and exercise caution in making investment decisions. Index funds may have tracking errors, and the performance of the index does not represent the specific performance of the product.