FTSE China A50 Index: Share Price, Chart and Forecast
The popular FTSE China A50 index enables traders to capture trading opportunities arising from movements in China’s stock markets. Composed of the 50 largest companies traded on the country’s stock exchanges, it serves and a barometer for the Chinese stock market.
Traders should understand what drives the ChinaA50 value and get familiar with its calculation methodology before they buy China A50. This is exactly what this article is about.
What is the FTSE China A50 Index?
The FTSE China A50 index tracks the performance of the 50 largest companies in terms of market capitalisation. Its composition, returns and methodology place it among the most popular indexes.
FTSE China A50 Definition
Also known as FTSE – Xinhua China A50, the FTSE China A50 index was launched in 2003. Due to its sectoral composition, the index is also used as an indicator for the overall performance of China’s economy. The index was created by FTSE Russell Company, the creator of several popular indices associated with the equities markets in China. The introduction of the China A50 index was motivated by investors’ interests to benefit from the significant growth in China’s emerging economy.
The index includes the 50 largest A-shares stocks, by market capitalisation, traded on the Shanghai and Shenzhen exchanges. The stocks listed are perceived to be the backbone of China’s economy and highly influential in their respective industries such as banking, insurance, utility, manufacturing…
FTSE China A50 is reviewed quarterly, in order to truly reflects the stock markets. The A-shares included in China A50 are companies incorporated in mainland China, denominated in Yuan. They are available for domestic and foreign investors. The index is calculated in Renminbi (Chinese Yuan) during trading sessions while the end of day values are available in Yuan, US dollar and Hong Kong dollars.
ChinaA50 Index Today and History
The FTSE China A50 index components list is subject to regular changes, with companies removed and added overtime. Based on its methodology and rules for inclusion or exclusion of companies, the list of FTSE China A50 index constituents goes through regular changes in accordance with the fluctuations in the stock’s performance.
Composition reviews are executed in March, June, September and December. Changes in index components are announced on Wednesday preceding the first Friday of March, June, September and December, so users can be notified prior to the actual deletion or addition of companies.
The FTSE China A50 Price Evolution
In general, the China A50 index price fluctuations show there could be numerous opportunities for speculative trading as well as investing.
FTSE China A50 Price Chart
Investors and traders can monitor the index via the FTSE China A50 index symbol “XIN9”. The index’s Reuters Instrument Code is “FTXIN9”, and its Bloomberg tickers are “XIN9I” and “TXIN9IC”. The following graph provides an overview of the movements in the FTSE China A50 index price.
FTSE China A50 index chart shows a couple of major peaks with significant dips and a tendency to form a mild trendy movement. The index had a base value of 5,000 CNY, and a couple of years after its introduction, it reached an All-Time-High (ATH) price of 23,160 in January 2007, right before the financial crisis. However, prior to hitting an ATH, the index dipped to an All-Time-Low (ATL) price of around 3,600 CNY in January 2005. By early 2008 at the heat of the financial crisis, the index lost nearly 70% of its ATH value in early 2007. However, the index managed to bounce back by more than 100% until the beginning of 2009, when it passed the 13,000 CNY mark.
In the following period, China A50 index recorded a couple of major peaks, the biggest at 18,000 in 2021. However, the index has yet to go up to the pre-crisis level of more than 20,000 CNY. Mid-2021, the index recorded a negative return, primarily due to the consequences of the pandemic and certain political factors and regulatory changes.
The calculations also show that China A50 total return over 3 years is set at slightly above 40%, while the 5-year total return is around 70%, with a compounded annual return of around 11%. The 5-year total return generated by the China A50 index shows that it has outperformed the total return generated by other China Indexes.
What Influences the Price of FTSE China A50 Index?
The sectoral composition and the economic importance of the China A50 companies means that its value may be influenced by many factors. These could be classified into various categories: company-related factors, factors associated with China’s economy and international factors.
Here are some of the factors that may significantly impact the index’s price:
- Movements in the price of a constituent with a higher index weight
- Structural changes in some of the major China A50 companies’ sectors
- Economic crisis, evident from the 70% decrease in index value during the 2008 financial crisis
- Trade agreements (or lack of agreements)
- China’s relations with other countries, especially major trade partners. Trade wars like the one between China and the US will obstruct potential growth in index value
- China Monetary and Fiscal policy – more relaxed policies should positively affect the overall economic development
- Fluctuations in GDP, retail sales, trade balances and other economic factors
- News and announcements about stocks listed in the index
- The exchange rate of Yen against other currencies influences the competitiveness of Chinese businesses at the international level. Hence, unfavourable changes for the Yen rate might put negative pressure on the index price.
The FTSE China A50 Companies and Components
Because China A50 is a free-float market capitalisation-weighted index, companies are selected according to their market capitalisation and calculations are based on the free float, i.e. the number of outstanding shares available for trading.
A company may be considered for inclusion in the index if it satisfies the following conditions:
- The stock is among the top 50 companies in China based on its free-float market capitalisation;
- The free float should be more than 5%;
- The stock should have an adequate level of liquidity, and its median trading volume should be more than 0.04% of the number of shares each month during the last eight months.
- When a constituent company is deleted from the list prior to review dates, stocks from the reserve lists will replace the deleted stock.
FTSE China A50 List of Stocks
Although the index lists stocks from different sectors, their overall weight is not equal, and the number of constituents from the same sector differs. For instance, some of the sectors with the highest weight are the financial and consumer sectors. FTSE Russell shows that in August 2021, out of the 50 components, 10 stocks belong to banks while 9 stocks came from the Food, Beverage and Tobacco sector.
The table below shows the ten companies with the highest market capitalisation included in the China A50 index.
|China Merchants Bank||600036||Financial|
|China Construction Bank Co||601939||Financial|
|Agricultural Bank China||601288||Financial|
|Bank of China||601988||Financial|
|Ping An Insurance||601318||Financial|
|China Life Insurance||601628||Financial|
Note that the list is not static, and is subject to changes following FTSE indices rules and methodology.
Should I Trade the FTSE China A50? Points to Consider
Some reasons that go in favour of trading the China A50 index are:
- The index generates a dividend yield of 2.43%
- FTSE China A50 index has a risk/reward ratio of 0.7; 0.6, and 0.4 for a 3-year, 5 year and 10-year period, respectively
- It has the potential to generate an annual total return of tens of percents, as was the case in 2014, 2017, 2019, and 2020 when the index had a return of 68.8%, 35.7%, 42.5% and 26.5% correspondingly
- The index has recorded yearly volatility of around 20%
- China A50 index outperforms some of the other popular indices related to China’s stock market and operated by FTSE Russell;
- For a company to be included in the index, that need a high level of liquidity
- The index limits effect coming from changes in the price in a single stock. This provides stable prices, and major price gaps are less likely to occur;
- Given the size and popularity of China A50 constituents and the importance of the index itself, there is a significant level of news and coverage by experts and analysts, which eases the analysis.
How Can I Trade the FTSE China A50?
So, how do I put my money in the FTSE China A50 index? There are quite a few options available for traders. One option is the iShares FTSE China A50 Index ETF fund that replicates the movements in the underlying index. Another option is to trade FTSE China A50 index futures, a derivative instrument based on the China A50 index.
The aforementioned opportunities to trade China A50 index may be too complicated, or they could come with high costs. However, ZFX broker CFDs that eliminates the drawbacks of the other instruments and enables traders to easily buy and sell FTSE A50 (China A50). Moreover, ZFX offers its clients generous leverage for opening positions with the FTSE A50 (China A50), as well as the popular MT4 platform. Here’s how to get started with this broker.
1 – Open a ZFX Account
First, open an account with ZFX. To do this, you need to go to the ZFX broker website and select either the “Open an account” button or select “Open a Live Trading Account”, as shown in the next image.
Of course, traders can also open a demo account before making real live trades and sharpen their trading skills while getting acquainted with the ZFX MT4 platform. After selecting the desired button, the next window will appear.
Proceed by filling in the required fields and following the next steps.
2 – Fund your Account
After going through the verification process and when you are ready to make live trades, it is time to fund your account. This can be done through Bank Transfer or with your Credit Cards. You need to log in to your account and go to the “Deposit” section.
3 – Verify your Account
Account verification is of crucial importance for ZFX’s security and safety procedures. Thus, traders need to provide a scanned copy of their national ID, Driver’s license or passport to verify their identity. Also, ZFX will ask you to verify that you have a valid bank account by uploading a copy of the bank statement or a page from your bank book.
4 – Start Trading on the ChinaA50
ZFX enables traders to track the FTSE China A50 index live on their website or use the ZFX MT4 trading platform.
To trade China A50, download and install the MT4 platform, then log in with the credentials sent to your email address. When you open the ZFX MT4 platform, the following screen appears.
To buy the China A50 index, you need to log in by selecting the accounts option and choosing your account and the ZFX live server. Next, find the China A50 index in the “Market Watch” section and double click. Lastly, the window containing the price graph is where you open your long position.
Tips and Things to Know Before Investing in the FTSE China A50 Index
Some of the most relevant tips that should be pointed out regarding the index are:
- FTSE A50 (China A50) is available during the following trading sessions – Monday – Saturday 09:00 – 01:55 Open, Trading Days 16:25 – 17:15 Closed (Beijing time)
- Traders should practice their skills on a demo trading account before they invest real money. In this regard, ZFX offers a free and intuitive demo account
- Regularly monitor the news related to the Chinese economy and the constituents’ stocks of the China A50 index
- Understand the benefits of the leverage offered by ZFX and how you can use this leverage to your advantage
- Understand the fundamental factors that could drive the China A50 price up or down
FTSE China A50 Future, Forecast and Predictions
In light of the international and domestic events, there is a certain level of uncertainty associated with the stock markets. Nevertheless, the anticipation of economic recovery increases the optimism associated with possible movements in indices values. Aside from the limitations on economic development imposed by the pandemic outbreak, the PBOC (People’s Bank of China) and the fiscal policy measures should put the economy back on track. Therefore, experts forecast that the China A50 might also record an upward movement side by side with the economic development.
However, some experts fear that there might be a limited negative effect in the short run coming from changes in regulations for liquor makers, competition in certain sectors, online pharmacies, etc. For instance, Tony Sycamore from CityIndex explains that the fall in China A50 price from above 20,000 down to around 14,500 might be considered a multi-period correction that comes after a strong trend. Therefore, it is forecasted that the bullish trend could resume if the price moves beyond the resistance level of 16,000.
Moreover, analysts that employ technical indicators forecast a potential rise in China A50 index price. Nonetheless, while there is a lack of consensus among technical indicator analysts about the expected high price for the index, they agree that the index could move beyond the 20,000 CNY threshold in a few years. Some analysts even anticipate that the price could reach the level of 25,000.
Bottom Line: Is FTSE China A50 a Good Investment Now?
After careful consideration of China A50 features and characteristics, that the index represents a good buying opportunity because:
- It has high liquidity, because of the strict selection criteria
- There is a lower number of short-term price shocks because the index is constantly updated and individual components influence on the index value is limited
- The index offers an opportunity to benefit from growth in the emerging Chinese economy
- The index has generated a solid level of returns in the past
- It has an acceptable level of volatility which makes it less risky compared to individual stocks, and it offers an acceptable risk/reward ratio
- The analysis is easier because of the wide interests in the China A50 index and the fact that this index is an underlying instrument for many tradable instruments;
- Due to the way in which its price fluctuates, you can use different strategies for trading the index.
- You can start investing today with ZFX, a regulated and efficient broker. Indeed, it offers this index and many other top trading assets.