(Yicai) Dec. 26 -- The Star Market Composite Index, which tracks the stock performance of companies listed on the Shanghai Stock Exchange’s Nasdaq-like Star Market, has soared 48.3 percent since its launch on Jan. 20, reflecting strong long-term investment support for China’s hardcore tech firms.

The index’s large gains are the result of policy support, improved industrial fundamentals and an influx of investment funds, reflecting to a certain extent the overall development of China’s science and technology innovation sector over the past year, Tian Xuan, director of Tsinghua University’s National Institute of Financial Research, told Yicai.

“The Star Market Composite Index’s strong rise in its first year marks the establishment of a clear index-based investment channel for China’s hard-tech firms,” said Tian Lihui, director of Nankai University’s Institute of Finance & Development.

“The rapid growth of exchange-traded funds linked to the Star Market Composite Index has turned the abstract narrative of “tech investment” into a practical tool for ordinary investors, effectively guiding private capital toward strategic tech enterprises,” he added.

Forty-five fund managers in China had launched 77 Star Market Composite Index-based ETFs with combined assets of CNY27 billion (USD3.8 billion) as of Dec. 24, including 22 listed on the Shanghai Stock Exchange.

Since their launch, these ETFs have attracted increasing investment from institutions including insurance funds, brokers and bank wealth management products. “This demonstrates that medium- and long-term investors recognize ETFs as a way to invest broadly in constituent companies, and also their strong confidence in the long-term value of Star Market stocks,” an industry insider told Yicai.

Profit Growth

The index’s significant rise also reflects the robust profit and revenue growth of these listed tech firms, driven by China’s fast-growing high-tech industry, Tian Lihui said.

A sample group of 576 companies on the Star Market Composite Index logged a 7.1 percent jump in net profit in the first three quarters from a year earlier to CNY48.3 billion (USD6.9 billion) while revenue soared 7.7 percent to CNY1.1 trillion (USD157 billion). Both profit and revenue growth has been getting faster each quarter, according to their third-quarter financial reports.

Global Expansion

As China accelerates the institutional opening up of its capital markets and further expands cross-border investment and financing channels, foreign capital inflows into the Star Market Composite Index are expected to grow, Tian Xuan said.

Star Market-listed companies are also expected to participate in global value chains through cross-border mergers and acquisitions, technological cooperation and other means to develop their business from local innovation to global leadership, he added.

Some 202 of the 576 sample stocks are from the industrial sector, 199 work in information technology, 107 are from the medical and health sector, 33 are engaged in the raw materials sector, 15 are from communication services, 19 focus on the consumer sector, and one is from the energy sector.

Of these, 10 have market caps of over CNY100 billion (USD14.2 billion) with a combined market value of about CNY2.8 trillion (USD400 billion). Together, they account for 27.5 percent of the total market value of the sample stocks.

Editors: Tang Shihua, Kim Taylor