Recently, the Federal Reserve's unexpected rate cut has opened a window for domestic monetary policy adjustments. Coupled with the central bank's announcement of a 0.5% reserve requirement ratio cut, a combination of measures has set the stage for a tumultuous start in the A-share market. Focusing on the core assets of the A-share market and anchoring new quality productive forces, the CSI A500 Index may be the optimal choice for seizing current opportunities.

On October 15th, the first batch of CSI A500 Exchange Traded Fund (ETF) open-end index securities investment funds, including the Southern CSI A500 ETF (code 159352), were officially listed. It is worth mentioning that Southern Fund announced that, based on confidence in the long-term healthy and stable development of China's capital market, Southern Fund will invest 50 million yuan in its equity fund, Southern CSI A500 ETF (code 159352), using its own funds today, and has committed to holding it for at least one year. The company will continue to invest in its equity funds using its own funds in the future.

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Industry insiders have pointed out that the number of constituent stocks and dividend characteristics of the CSI A500 Index have raised higher requirements for fund managers' ETF management experience and their ability to create excess returns. Among the first batch of CSI A500 ETF managers, Southern Fund has rich experience in managing broad-based ETFs, with a portfolio that includes the CSI 500 ETF and the CSI 1000 ETF, among other broad-based index funds. In the future, Southern Fund is expected to fully absorb the management experience of the CSI 500 ETF and other broad-based ETFs, adhere to refined ETF management, and leverage the industry's advanced intelligent index investment platforms and quantitative investment methods to reduce transaction costs in various ways, strictly control tracking deviation, and steadily increase returns.

Anchoring new quality productive forces and focusing on core assets, the CSI A500 Index has a balanced allocation. The index sample space is the CSI All-Share Index, with industry weights benchmarked against the CSI All-Share Index. Its constituent stocks have lower coverage of weighted stocks such as real estate and finance, highlighting industries such as information technology, industry, discretionary consumption, and materials, making it a microcosm of the A-share market.

Looking at the long-term changes in national policies and the market, the industry market value structure of listed companies tends to be consistent with the long-term changes in the national industrial structure. As an index reflecting the performance of core leading listed companies in the entire market, the constituent stocks of the CSI A500 Index cover all 30 first-level industries of Shenwan, reflecting the trend of macroeconomic structural adjustment and industrial transformation and upgrading. Among them, the weight of advanced manufacturing and information technology industries has increased compared to the CSI 300 Index, while the weight of finance and primary consumption industries has decreased. Significantly over-allocated industries include non-ferrous metals (+1.35%), power equipment (+1.57%), national defense and military (+1.13%), and pharmaceuticals and biology (+1.34%), with a greater focus on industries such as China's new energy, innovative drugs, commercial space, domestically produced large aircraft, and low-altitude economy, featuring significant new quality productive forces.

The CSI A500 is one of the representatives of broad-based indices and belongs to the large and medium-sized style index. The total market value of the index is 39 trillion yuan, and the total free-floating market value is 16.5 trillion yuan, covering 56% and 55% of the entire A-share market, respectively. More than 50% of the weight is concentrated on stocks with a market value of over 100 billion yuan, and 99% of the weighted stocks have a market value exceeding 10 billion yuan.

Specifically, for the index target stocks, the top ten heavy-weight stocks of the CSI A500 are all in the leading position of their industries, with a weight ratio of 20.85%. The index weight distribution is more dispersed, and the index coverage is broader, which can depict the structural characteristics of the A-share market industry from multiple angles in detail. In terms of dividend yield, the CSI A500 Index has a high dividend attribute and may become a high-quality tool for long-term investment allocation under the promotion of the new "Nine National Policies". From a fundamental perspective, in 2023, the average ROE of the constituent stocks of the CSI A500 Index is 10.3%, and the average revenue growth rate is 3.4%. Compared with the CSI 300 Index (average ROE of 10.23%, average revenue growth rate of 2.59%) and the CSI 500 Index (average ROE of 7.28%, average revenue growth rate of -0.03%), the profitability of the constituent stocks is higher than that of similar indices.

The newly added ESG evaluation and screening system, with strong liquidity, on the one hand, has the broad-based attributes of the CSI A500 Index, and on the other hand, it surpasses traditional broad-based indices. It selects 500 securities as index samples according to the free-floating market value and maintains the sample's first-level industry market value distribution as consistent as possible with the sample space, avoiding the general index's inability to reflect the trend of economic transformation and upgrading due to the use of market value weighting.In addition, the CSI A500 Index incorporates elements such as the ESG sustainable investment concept and interconnectivity screening: it excludes securities with a CSI ESG rating of C or below, requires constituent stocks to meet the criteria for Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, and have a market value ranking in the top 1500 in the entire market, while also having a market value share greater than 2% within their respective industries.

Looking at past performance, the integration of ESG factors can effectively improve the overall performance of the index. Taking the traditional broad-based CSI 800 Index as an example, when ESG factors are integrated to form the 800ESG Index, the 800ESG Index has historically achieved an annualized excess return of approximately 1% compared to the CSI 800.

Ultimately, the sample of the CSI A500 Index not only better meets the investment standards and the needs and trends of foreign capital allocation to A-shares but also meets the requirements of market value and industry representativeness, further increasing the liquidity and investability of the index.

Drawing on the management experience of the CSI 500 ETF, and adhering to refined management, industry insiders have pointed out that the number of constituent stocks and dividend characteristics of the CSI A500 Index pose higher demands on the ETF management experience and the ability to create excess returns for fund managers. Among the first batch of CSI A500 ETF managers, Nanfang Fund has a rich layout of ETF product lines, covering broad-based indices, cross-border markets, industry themes, and more, especially with rich management experience in broad-based index ETFs. It owns several broad-based index funds such as the CSI 500 ETF (510500), the CSI 1000 ETF (512100), and the CSI 300 ETF Nanfang (159925). As of August 30, the CSI 500 ETF (510500) has distributed dividends totaling over 1.2 billion yuan since its establishment.

In the future, in the management process of the CSI A500 ETF Nanfang (159352), Nanfang Fund will fully draw on the management experience of the CSI 500 ETF and other broad-based ETFs, adhere to refined ETF management, and utilize advanced intelligent index investment platforms and quantitative investment methods in the industry to reduce transaction costs in various ways, strictly control tracking deviation, and steadily increase returns.

Zhu Henghong, the fund manager of the CSI A500 ETF Nanfang (159352), stated that the recent continuous narrowing of the year-on-year decline in PPI may indicate that the profits of the entire industrial enterprise are in a stable recovery state. In the future, as PPI continues to narrow, the net profit of A-shares is also expected to continue to rise. Coupled with the current low valuation, the overall investment cost-performance ratio is relatively high. Regarding the investment research and management of the CSI A500 ETF, the CSI A500 TETF will further optimize the investment structure based on the characteristics of the CSI A500 that are more in line with the new era economic structure, enrich the choices for investors in the market, and adopt the lowest industry fees, that is, a management fee of 0.15% and a custody fee of 0.05%, bringing convenience and a better experience to investors.