Charting China companies; Index tracks performance of Singapore- listed Chinese firms
TODAY (Singapore)
Investors will now be able to read into the performance of Chinese-owned and Chinese- managed firms listed on the Singapore Exchange (SGX) using Singapore's first China index that tracks how they perform.
The PrimePartners China Index (PrimePartners CI), which will be available on the SGX website from Monday, will serve as a "blue chip representative of the China growth story" for Chinese firms listed here, said Mr Quek Peck Lim, chairman of Singapore- based PrimePartners which created the index.
PrimePartners CI will comprise 25 stocks out of the first 88 Chinese-owned and Chinese- managed companies listed on the SGX as at the end of last year.
The index is value-weighted and covers most sectors in manufacturing, transport/storage/communications, commerce and services.
Its top five component stocks, comprising 55.7 per cent of the index's total market capitalisation, are Cosco Corp Singapore, Pine Agritech, People's Food Holdings, Celestial Nutrifoods, and Midas Holdings.
China stocks represented 15 per cent, or one-in-seven shares, traded daily on the SGX, as at December 2005. Back then, the 88 Chinese stocks made up 5 per cent of the SGX's total market capitalisation of $331 billion.
By the end of August this year, total market capitalisation of the expanded universe of Chinese stocks - 105 then- represented 5.9 per cent of the SGX's $481-billion market capitalisation.
In the January-to-September period this year, the index would have gained 26.9 per cent, compared with an 8.4-per-cent gain on the ST Index.
The companies in the index were selected on the basis of market capitalisation, trading volume, industry representation, the total number of issued shares, and free-float percentage, said Mr Quek.
However, corporate governance would also be an important factor to consider going forward when deciding to include a stock into the index, especially as more Chinese companies vie for a position in the index, he added.
Hence, China Aviation Oil (Singapore), or CAO, has not been included in the index despite having a large enough market capitalisation "because it had problems of its own".
CAO nearly collapsed in 2004 after racking up about US$550 million ($871.9 million) of derivatives trading losses that were not disclosed.
In future, CAO could be included in the index, during the half-yearly review of the index's constituents, Mr Quek said.
PrimePartners is working with the SGX and other financial institutions to develop instruments based on the index, but these would not be in the market until next year.
"We are in discussions with market participants to interest them in financial instruments (such as) futures contracts, warrants, and possibly even an exchange traded fund," said Mr Quek.
The PrimePartners CI is currently carried by Reuters Group. The company is in discussions with other media, such as the local dailies and Bloomberg, to publish the index.