In recent months, the tech sector has seen remarkable advancements, almost like a battle of divine beingsDeepSeek has emerged spectacularly, capturing global attention, while the Yu Shu Robot has showcased its agile prowess in dance, radiating energy that symbolizes the innovative spirit of Chinese enterprisesAs these firms embark on the path of transformation, they are accelerating towards the era of technological exploration akin to the Maritime Era of the past.

The continuous stream of technological breakthroughs has proven to be a catalyst for the capital marketThe Science and Technology Innovation Board, known for bringing together numerous high-tech firms, has garnered significant interestSince the launch of the Science and Technology Innovation Comprehensive Index on January 20, 2024, it has seen an impressive increase of 8% within just ten trading days by February 10. The ETFs that track this index, such as those offered by E-Fund, were made available for trading starting February 17.

This new index presents numerous investment opportunities that are worth exploring!

What Brought About the Science and Technology Innovation Comprehensive Index?

Since its inception in July 2019, the Science and Technology Innovation Board has operated smoothly, effectively fulfilling its role as a “testing ground” for reformsIt has continuously established itself as the primary platform for nurturing new productive forcesBy the end of 2024, the number of companies listed on the board had reached 581, with a market capitalization exceeding 6.3 trillion yuan.

In recent years, the index system pertaining to the Science and Technology Innovation Board has been refined, with over 25 distinct indices published

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These cover a variety of aspects, including size, themes, and strategies, and products both domestic and abroad tracking this system have amassed an estimated scale of 250 billion yuan.

At the same time, the demand from investors for an index that reflects the overall operational situation of companies listed on the Science and Technology Innovation Board has been steadily risingAmong the already published Science and Technology Innovation 50, 100, and 200 indices, a total of 350 stocks are included, representing roughly 60% of the listed stocks on the boardHowever, over 200 small and medium enterprises remain uncoveredIn this context, the Science and Technology Innovation Comprehensive Index has emerged.

This comprehensive index is designed to reflect the overall performance of the Science and Technology Innovation Board marketIt selects all qualifying listed company stocks as samples and incorporates dividend distributions into the index returns, representing the overall performance of stocks after accounting for dividends.

Data from Wind indicates that the number of sample stocks in the index has exceeded 560, covering nearly 97% of market capitalization, and includes a diverse range of large, medium, and small-cap stocks, effectively augmenting the index system.

A Fresh Investment Perspective: Investing at the Forefront, Comprehensive Approach, and Early-stage Opportunities

The Science and Technology Innovation Comprehensive Index is complementary to better-known indices like the Science and Technology Innovation 50 and 100. Each index emphasizes different aspects, representing the operational conditions of the Science and Technology Innovation Board from various perspectives

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The key characteristics of the Science and Technology Innovation Comprehensive Index can be summed up by three terms: “Investing at the Forefront,” “Comprehensive Investment,” and “Early-stage Investment.”

“Investing at the Forefront” means that the Science and Technology Innovation Comprehensive Index, similar to the Science and Technology Innovation 50 and 100 indices, focuses on cutting-edge technology sectorsThe stocks in the index primarily belong to strategic emerging industriesFor instance, more than half of the index comprises stocks from the new-generation information technology industry, followed by the biopharmaceutical sector and high-end equipment manufacturing.

Moreover, the research and development intensity of the stocks included in this index is notableIn 2023, 79 constituent companies had R&D intensities exceeding 30%, while 344 had figures over 10%. Over the past three years, the constituent stocks have displayed an average annual growth rate of 27.3% in R&D spending.

“Comprehensive Investment” refers to the extensive industry coverage of the Science and Technology Innovation Comprehensive IndexAccording to the Shenwan Industry Classification, it encompasses all 17 primary industries listed on the Science and Technology Innovation Board and 44 out of 46 secondary industries, surpassing both the Science and Technology Innovation 50 and 100 indices.

When examining the concentration of industry distribution, the Science and Technology Innovation Comprehensive Index is comparatively less concentratedThe top three weighted industries are semiconductors, power equipment, and machinery manufacturing, with the semiconductor sector accounting for less than 40% of the index

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In contrast, the Science and Technology Innovation 50 Index's semiconductor sector holds over 60% weight.

“Early-stage Investment” emphasizes that the Science and Technology Innovation Comprehensive Index covers a broader spectrum throughout the innovation lifecycle, focusing more on small-cap stocks in the early stages of innovationIts coverage of the board's market capitalization is nearly 97%, with an overall style leaning towards small and mid-cap stocks.

In the index, stocks with a market cap of 5 billion yuan or less constitute over half, while those above 30 billion yuan account for less than 10%. This setup presents investors with opportunities to engage at the early development stages of technological innovative firms.

Overall, the Science and Technology Innovation Comprehensive Index demonstrates a noticeable growth attribute, showcasing a high potential for expansionFrom 2020 to 2023, the compound annual growth rate for revenue of the constituent stocks reached 23.9%, while the compound annual growth rate for net profit attributable to the parent company reached 8.8%. For the years 2024-2026, it is projected that constituent stocks will experience revenue growth rates of 7%, 23%, and 20%, with expected net profit growth rates of 16%, 68%, and 38% respectively.

According to Pang Yaping, the general manager of the E-Fund Index Research Department, the launch of products like the Science and Technology Innovation Comprehensive Index ETF provides investors with new tools to strategically position themselves for the “hard technology” growth opportunitiesThis is likely to facilitate the flow of funds into innovative sectors, thereby serving the development of new productive forces and enhancing the “technology-industry-finance” virtuous cycle.

E-Fund has been continuously enhancing its product lineup for the Science and Technology Innovation Board over the years, introducing products that track indices such as the Science and Technology Innovation 50, 100, Artificial Intelligence, and Growth indices

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