
Core Viewpoint - The Shenzhen Stock Exchange (SZSE) announced revisions to the ChiNext Index compilation method to enhance investability and introduce an ESG negative screening mechanism, which will exclude stocks rated below B from the index [1][4]. Group 1: Index Compilation Revisions - The revisions include the introduction of an ESG negative screening mechanism to maintain the purity of sample stocks by excluding companies with significant environmental, social, and governance issues [1][4]. - A weight adjustment factor will be implemented to ensure that no single stock's weight exceeds 20% during periodic adjustments, aimed at reducing the influence of individual stocks on the index [1][2]. Group 2: Implications for the ChiNext Index - The ChiNext Index selects 100 stocks with high market capitalization and liquidity from approximately 1,380 listed companies, making inclusion prestigious for those companies [1]. - The introduction of the ESG screening mechanism is expected to enhance the investability of the index and mitigate related investment risks [1]. Group 3: Recommendations for the Shanghai Stock Exchange - The approach taken by the SZSE for the ChiNext Index could serve as a model for revising the Shanghai Composite Index, which currently suffers from distortion due to the overwhelming influence of a few large-cap stocks [4][5]. - To address the distortion in the Shanghai Composite Index, it is suggested to implement a similar exclusion mechanism for poorly rated companies and to limit the weight of individual stocks to a maximum of 1% or even 0.5% [5].