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SSE 180 Index

•5) Selection Method ： SSE 180 Index follows the next four steps to select constituents after the index universe is defined.
a) Produce an overall rank for the stocks based on total market capitalization, negotiable market capitalization, trading values and turnover ratio.
Method: Rank by each indicator based on daily average data for the previous year, and sum up the four ranks to get the overall rank.
b) Allocate number of constituents for each industry based on negotiable market capitalization coverage.


Method:

                                                                                 Total Negotiable market
                                                                                    cap for all candidate
                                                                                       stocks of industry i
No. of constituents for industry i = ────────────────────── × 180
                                                                           Total Negotiable market cap for
                                                                 all candidate stocks in Shanghai market

c) Select top ranking stocks within each industry based on number of constituents allocated.
d) Make adjustment to stocks selected so that the total number of constituents is 180.

Index Adjustment
SSE 180 Index will make constituent adjustment every 6 months following principle of Stability and Dynamic Tracking. Constituents adjusted each time will not exceed 10%. Temporary adjustment can be made under certain circumstances if necessary.

Index Calculation
• 1) Base Day, Base Period and Base Value
SSE 180 Index is an index continuing from SSE 30 Index. The Base Day for SSE 180 is June 28, 2002 . The Base Value is 3299.06, which is the closing value of SSE 30 Index on the Base Day. The Base Period is the adjusted market capitalization of all constituents after closing on the Base Day. The Index was launched on July 1, 2002 .

• 2) Calculation Formula
SSE 180 Index is weighted by adjusted number of shares.
The formula is 



                                    Current adjusted market cap of constituent
Current index = ───────────────────────── × Base Value 
                                                             Base Period


Adjusted market cap = Σ Price X Adjusted No. of shares. Adjusted market cap of constituents on the base day is also called divisor. SSE 180 Index uses category-weighted method (as indicated by the following chart) to adjust constituents' sharers. For example, a stock with a negotiable market share ratio (negotiable market cap /total market cap) of 7%, which is below 10%, will have a weight equals to its negotiable market capitalization ratio. A stock with a negotiable market share ratio of 35% will belong to category (30 ， 40). The corresponding weight is 40%, i.e. 40% of total market share will be used for index calculation.

Negotiable
Market Share
Ratio (%) ≤10 (10，20] (20，30] (30，40] (40，50] (50，60] (60，70] (70，80] >80
Weight(%) Negotiable
Market
Share Ratio 20 30 40 50 60 70 80 100

Index Maintenance
• 1) Maintenance formula
The “Divisor Adjustment Methodology” is used to adjust SSE 180 Index.
When changes occur to constituent list or the share structure, or constituents' market value changes due to non-trading factors, the divisor is adjusted to keep the index comparable overtime.
The formula is ：
Adjusted Market Cap before Adjustment             Adjusted Market Cap after Adjustment
──────────────────── = ─────────────────—
                          Old Divisor                                                           New Divisor

Adjusted Market Cap after Adjustment = Adjusted Market Cap before adjustment + Adjusted Market Cap increased or decreased
The new divisor (also called new base period) derived from this formula is used for later index calculation.

• 2) Circumstances for index maintenance
a) New listing: newly listed stocks can't be constituents until they have been listed for 3 months. If a stock's daily average negotiable market capitalization of a stock is ranked top 18 in Shanghai Market, then it doesn't need to meet the 3-month requirement.
b) Dividend: no index adjustment is required for dividend payment and the index is allowed to fallback naturally.
c) Right issue and bonus issue: the index is adjusted the day before the issuance. Adjusted Market Cap after the Adjustment = Adjusted Price × Adjusted No. of Shares + Adjusted Market Cap before the Adjustment (excluding stocks adjusted for right issue and bonus issue)
d) Suspension from trading: Use last trading price to calculate index until trading is resumed.
e) Delisting: Adjust the index the day before the delisting.
f) Share changes: when shares of constituents change due to other reasons (e.g. re-issuance, listing of right issue, listing of employee shares), the index is adjusted the day before the changes.
g) Stop trading: The Index will be calculated as usual if some constituents stop trading; the Index will not be calculated if all constituents stop trading.

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