To The Moon

Where to Begin

On July 30, the wholly-owned subsidiary of the Shenzhen Stock Exchange, Shenzhen Securities Information Co., Ltd. (referred to as "SSIC"), partnered with the China Bond Financial Valuation Center to launch four new multi-asset index series, further enriching the supply of stable indexes.

The four index series introduced are the CCDC SZSE Free Cash Flow Comprehensive Bond Index Series, the CCDC SZSE Free Cash Flow Investment Grade Credit Bond Index Series, the CCDC SZSE ChiNext Index Exchange Sci-Tech Bond Index Series, and the CCDC SZSE ChiNext 50 Exchange AAA Credit Bond Index Series. All adopt a stock-bond constant ratio strategy, with each series comprising six indexes. The stock-to-bond allocation ratios are set at 5%:95%, 10%:90%, 15%:85%, 20%:80%, 25%:75%, and 30%:70% respectively.

Reasons for the 10 ASX 200 Share Limit

The stock-bond constant ratio strategy involves investors pre-setting fixed target allocation ratios for stocks and bonds. When market fluctuations cause the market value of stocks or bonds to deviate from these targets, regular rebalancing occurs by selling assets that have appreciated and buying those that have declined, maintaining the original proportion. This strategy is a fundamental rebalancing approach in asset allocation, serving as a performance benchmark for institutions' multi-asset portfolios and helping to expand channels for medium- to long-term capital inflows.

Fu Yifu, a special researcher at SuShang Bank, explained to the Securities Daily that the fixed stock-bond ratio enables automatic rebalancing with three key benefits: first, it reduces volatility by leveraging the negative correlation between stocks and bonds to smooth returns; second, disciplined rebalancing avoids timing errors, making it suitable for long-term holding; and third, it provides a clear risk budget framework, facilitating asset allocation and performance evaluation for institutions, particularly suited for long-term funds like social security and pension funds, which are sensitive to drawdowns.

Delving Deeper

Looking further, the CCDC SZSE Free Cash Flow Comprehensive Bond Index Series and the CCDC SZSE Free Cash Flow Investment Grade Credit Bond Index Series use the SZSE Free Cash Flow Index on the stock side, which gathers listed companies with strong operational quality and stable free cash flow. On the bond side, they employ the CCDC New Comprehensive Index and the CCDC Preferred Investment Grade Credit Bond Index, representing the overall Chinese bond market and the high-grade credit bond market, respectively.

The CCDC SZSE ChiNext Index Exchange Sci-Tech Bond Index Series and the CCDC SZSE ChiNext 50 Exchange AAA Credit Bond Index Series adopt a structuring framework of "ChiNext stock index + exchange bond index." On the stock side, they use the ChiNext Index and the ChiNext 50 Index, showcasing the innovative and high-growth characteristics of the ChiNext market. On the bond side, they utilize the CCDC Exchange Sci-Tech Innovation Bond Index and the CCDC Exchange Credit Bond AAA Index, representing the performance of sci-tech credit bonds on the exchange market and high-grade credit-rated bonds on the exchange market, respectively.

Data shows that as of now, SSIC has released a total of 56 multi-asset indexes, all employing the stock-bond constant ratio strategy. These cover high-quality assets on the stock side, such as the ChiNext and free cash flow indexes, and on the bond side, including market-making bonds and AAA credit bonds. SSIC stated that moving forward, it will focus on serving the long-term capital inflow agenda, increase the supply of stable indexes, and enrich the variety of stock-bond multi-asset index products, contributing more index power to foster a "long-term capital, long-term investment" capital market ecosystem.