Last week a fan friend made a request for me to systematically organize and analyze the pharmaceutical (medical) index. When I saw this request, I was crushed inside while organizing, analyzing, and writing the article x N....
Because there are really so many indices in the pharmaceutical category, and the compilation rules are very similar to each other, unlike the consumer indices which are so different, it does take a lot of effort to systematically organize and analyze them, and to select the best among the best.
All right, let's get right down to business.
I've compiled a list of all the pharma and healthcare indices in the market, and there are 47 compiled by CSI and 31 compiled by CSI, which is a surprisingly large number.
We went through an initial screening process, eliminating those indexes that didn't have tracking funds to invest in, and ended up with these 18 in the mind map.
Although there is a lot less, however, analyzing each of the 18 is still a lot of work, and categorization is particularly important. So I'm going to further categorize these 18 medical and healthcare indices into three articles to analyze them in detail, and give my personal recommendations at the end.
After comprehensive consideration, the final decision was made to classify according to the characteristics of the preparation rules, which are divided into the major categories of medicine and health, pharmaceuticals, biotechnology and other sub-categories and medical and health care, as shown in the following mind map:
Here, I do a simple popularization, according to the classification standards of the CSI index company, **** the formation of the 10 first-class industry, medicine and health is one of the first-class industry.
And the pharmaceutical and health industry below also contains a lot of further fine molecular industries, including and not limited to pharmaceuticals, biotechnology services, chemical drugs, traditional Chinese medicine, drug distribution and retailing, medical devices, medical supplies and services, and so on, these are pharmaceutical and health industry fine molecular industries.
So we followed this logic to briefly categorize the 18 indices above. In today's issue, we'll start by organizing and analyzing the first one, which is the 7 indices within the broad category of medicine and health. The other two categories will also be analyzed in later articles.
According to the usual practice, we first list and compare these 7 index compilation program and constituent stock characteristics:
(1) index compilation rules
The full name of the 300 pharmaceuticals is CSI 300 Pharmaceuticals & Healthcare Index, and the constituents of the index are selected from the CSI 300 to comprise stocks in the pharmaceuticals and healthcare industry. Currently there are only 26 constituent stocks in the index.
We know that CSI 300 is a large-cap blue-chip index, so the 300 Pharmaceuticals Index can also be described as an index of leading stocks in the pharmaceutical and healthcare industries.
(2) Top Ten Weighted Stocks
The top ten weighted stocks of the index accounted for 71.11%, and Hengrui Medicine's weight accounted for 22.68%, which is even more than three times that of Changchun High-Tech.
It can be seen that 300 medicine has such characteristics, the constituent stocks are A shares of the pharmaceutical industry leader, the number of constituent stocks is small, the weight is more concentrated, the performance of the top ten weighted stocks on the index has a great impact, especially to see the big brother of Hengrui Medicine's performance.
So we can define the 300 Pharmaceutical Index as the leading pharmaceutical index, representing the performance of the leading stocks in the pharmaceutical industry.
(1) Index compilation rules
Similar to the compilation of the 300 Pharma, the 500 Pharma is an index of stocks in the pharmaceutical and healthcare industry selected from the CSI 500 index. The current number of index constituents is 55.
Similarly, the CSI 500 is a small-cap index of our A-shares, so the 500 Pharma can be considered an index of small-cap stocks in the pharmaceutical and healthcare sectors.
(2) Top Ten Weighted Stocks
The weight distribution of the 500 Pharmaceuticals Index continues to be more decentralized than that of the CSI 500, and the proportion of the top ten weighted stocks is not very high, with the highest being only 4.48% of the total.
As these SMEs are close in market capitalization, the weighting percentage is also relatively close. As you can see from the chart, it's entirely dominated by mid-capitalization, and none of the pharma giants we're familiar with will be included in it.
So we can also define the 500 Pharma Index as a growth-oriented index in the pharmaceutical and health industry, representing the performance of small and mid-cap companies in the pharmaceutical industry.
(1) Indexing Rules
CSI Pharmaceuticals & Healthcare Index consists of pharmaceutical and healthcare stocks in the sample of CSI 800 Index. The current number of constituent stocks is 81.
Interestingly, those who are familiar with the indexing scheme should be well aware that the CSI 800 index can be viewed as CSI 300 + CSI 500, and since the constituents of these three pharmaceutical indexes in turn are selected from CSI 800, CSI 300 and CSI 500, we can also see:
CSI Pharmaceuticals Constituents = 300 Pharmaceuticals Constituents + 500
This is also evidenced by the number of constituents, 81=26+55. Of course, the above relationship is limited to the constituents themselves, and there is still a difference in the way the indexes are weighted.
(2) Top Ten Weighted Shares
Despite the fact that the constituents are the 300 Pharma+500 Pharma, the index is, after all, market-capitalization-weighted, and the weights will naturally be more heavily weighted towards the 300 Pharma's leading shares. So we can see that the top ten weights of CSI Pharma are almost identical to those of 300 Pharma.
But there is a difference, the top ten weighted stocks together accounted for only 43.08%, Hengrui medicine's weight accounted for only 9.39%, compared to the 300 medicine to be dispersed a lot.
This is because CSI Pharmaceuticals has added a weight limit to its compilation program, and when the sample size is 50-100, a single sample stock cannot exceed 10%, which makes the weighting relatively decentralized, and combines a certain amount of leading characteristics and growth characteristics.
(1) The rules for compiling the index
The CSI Pharmaceuticals Index selects stocks with good liquidity and market representation from the CSI's sample pharmaceuticals industry to form the index's sample stocks, and there are currently 240 constituent stocks.
The CSI All Share Index basically covers all the listed stocks in the Shanghai and Shenzhen A-shares, and by analogy, the All Share Pharmaceutical Index also includes almost all the stocks in the pharmaceutical and healthcare industries in the Shanghai and Shenzhen A-shares, with no restriction on market capitalization.
(2) Top Ten Weights
The top ten weights of the index are almost the same as the 300 Pharmaceuticals and the CSI Pharmaceuticals, except that the weights are further decentralized, with the top ten weights accounting for only 33.5% of the total. Compared to the two components of a larger number of shares, the weight is more dispersed is also normal.
The rules for compiling the index also limit the weighting to 10%, so the weighting of Hengrui Medicine is only 9.51%.
It can be seen that the characteristics of the index are closer to those of the CSI Pharmaceuticals, which includes a wide range of market capitalization classes and more diversified weights.
So, it can be said that the All Share Index represents the average performance of the entire pharmaceutical industry, the overall performance.
(1) index compilation rules
SSE Pharmaceuticals Index selects stocks in the pharmaceutical and healthcare industries in the Shanghai stock market, which is equivalent to selecting stocks in the pharmaceutical and healthcare industries from the SSE Composite Index to form the index. The current number of constituent stocks is 35.
The number of constituent stocks is not large because the compilation program restricts the number of constituent stocks by referring to the two indicators of average daily turnover and total market capitalization, and the number is capped at 50. It can be interpreted as an index of stocks listed on the Shanghai Stock Exchange with large and medium market capitalization and high average daily turnover.
(2) the top ten weighted stocks
The weight of the SSE pharmaceuticals is relatively concentrated, the top ten weighted stocks accounted for 61.37%, due to the absence of a weight limit, Hengrui Medicine and WuXi KangDe's weight is significantly higher than that of other stocks, accounting for 13.83% and 11.80% respectively, which is similar to the 300 medicine, the performance of the whole index is more dependent on the top ten stocks, and the average daily turnover of the average market capitalization. The performance of the index is more dependent on the top 10 stocks, especially Hengrui Medicine and WuXi AppTec.
Another unique feature of SSE Pharma is that it only selects healthcare stocks from the Shanghai market, which is a minor drawback for the index, as it misses out on the Shenzhen market's best pharma stocks, such as Changchun High-Tech.
So we can define the SSE Pharma Index as the large and mid-cap companies in the pharmaceutical and healthcare industry in Shanghai, reflecting the performance of such companies.
(1) Index compilation rules
The CSI Pharmaceuticals and Healthcare Industry Index selects 80 stocks attributed to the pharmaceuticals and healthcare industry with outstanding size and liquidity as the sample stocks, which reflects the overall earnings performance of the listed companies in the pharmaceuticals and healthcare industry of the Shanghai and Shenzhen cities.
The major difference with the previous indexes is that the previous indexes further select the stocks in the pharmaceutical and healthcare industry from a specific index, while the CSI Pharmaceuticals selects a fixed number of stocks from the pharmaceutical and healthcare industry to form the sample.
(2) the top ten weighted stocks
The index of the top ten weighted stocks accounted for a total of 46.22%, is not considered concentrated, however, we can see that Hengrui medicine in the index can be said to be a one-trick pony, the weight accounted for 12.92%, the second of the Mileage Medical is only 5.56%, which is similar to the characteristics of the 300 medicine, the index comparison to see big brother Hengrui medicine, weight accounted for 12.92%, and only 5.56% of the second Mileage Medical, which is similar to the 300 medicine. The index is more to see the face of big brother Hengrui medicine.
The CSI Pharmaceuticals Index has a similar compilation program to the CSI Pharmaceuticals Index, with close to the same number of constituents and a high degree of constituent overlap, and naturally exhibits similar characteristics:
We can think of the CSI Pharmaceuticals Index and the CSI Pharmaceuticals Index as being more balanced, with a certain amount of leading and growth characteristics.
(1) The rules of index compilation
CSI Pharmaceuticals 50 Index consists of 50 leading companies in the pharmaceutical and healthcare industries in Shanghai and Shenzhen that are large in scale and have good quality of operation.
The stock selection criteria of the index not only considers the average daily total market capitalization of the sample stocks, but also considers a company's fundamentals such as earnings, ROE and gross margin.
At the same time, in order to make the coverage of the industry segments more uniform, the index in the selection of stocks from the various segments of the industry in an even selection of stocks, so the pharmaceutical 50 index of the coverage of the industry segments will be broader, because the selection of stocks also considered some fundamental indicators, the profitability of the constituents will be relatively stronger.
(2) the top ten weighted stocks
index of the top ten weighted stocks accounted for a total of 56.79%, the weight distribution is relatively average, the same set of weight limit, the highest Hengrui medicine weight 9.4%. As you can see, even if the selection of stocks to join a series of profitability indicators, but we look at the constituent stocks, still with a few other pharmaceutical indexes are not very different, only compared to the previous several indexes weight more decentralized some.
From the perspective of constituent characteristics, the Pharma 50 index can also be seen as the leading index in the pharmaceutical industry, with large-capitalization companies dominating the constituent stocks, the number of constituent stocks is slightly higher than that of the 300 pharmaceuticals, and the weighting is more decentralized than that of the 300 pharmaceuticals.
Above, we have summarized and introduced the compilation rules and constituent stock characteristics of each index, and finally, we will do a summary:
Comprehensively, we can roughly derive this preliminary understanding:
Among the seven indexes, 300 Medicine and Medicine 50 Index can be regarded as the leading index of the large-capitalization of the medical and health industry, and the difference between them is that they can be considered as the leading index of the large-capitalization of the medical and health industry. strong> , the difference between the two is that the former has a smaller number of constituent stocks, the weight is more concentrated in the big brother Hengrui Pharmaceuticals, while the latter has relatively more constituent stocks, and the weight is relatively more decentralized.
Next, CSI Pharmaceuticals, CSI Pharmaceuticals and SSE Pharmaceuticals are similar in characteristics, the constituents of all three indices include both large and mid-capitalization companies, both leading attributes and growth attributes, the difference between the three is that CSI Pharmaceuticals is relatively more dispersed in the allocation of weights; while the CSI Pharmaceuticals is more centralized in the Hengrui Medicine; SSE Pharmaceuticals is more centralized in the Hengrui Medicine; the constituents are limited to the Shanghai Stock Exchange. The constituents are confined to the Shanghai Stock Exchange, and the weighting is more concentrated on two headline companies, Hengrui Medicine and WuXi AppTec.
The 500 Pharmaceuticals Index contains exclusively small- and mid-cap companies, and because of its comparable market capitalization and extremely even weighting, it can be viewed as a small- and mid-cap growth index for the pharmaceutical industry.
Lastly, the All-Indicators Pharmaceuticals index is a collection of almost all of the pharmaceutical stocks in the Shanghai and Shenzhen A-shares, which has the widest range of large, medium, and small-capitalization companies, so the index is basically a reflection of the average level of the entire pharmaceutical and health care industry, rather than a specific type of pharmaceutical stocks.
The next step is to knock on the blackboard and take notes:
Only from the above characteristics, we can draw a preliminary conclusion:
If you believe that the future of the pharmaceutical industry is strong, then the 300 Pharmaceuticals and the Pharmaceuticals 50 index is the
If you want both stability and growth, then the CSI and the CSI should be the first choice;
If you feel that the growth of small-cap stocks in the pharmaceutical industry has a higher ceiling,
If you feel that the growth of small-cap stocks in the pharmaceutical industry has a higher ceiling, then the 500 pharmaceuticals is a good choice.
If you simply hold on to the growth dividends of the entire pharmaceutical and healthcare industry, then you can go for the all-indexed pharmaceutical!
The last part of the article, we have a simple comparison of the historical performance of several indexes, and then organize the tracking fund corresponding to each index, and finally combined with the two best of the best, and give my personal recommendation:
The performance of these several pharmaceutical indexes is really difficult to compare, no matter from which point of view to compare, I feel that some of the one-sided, this part of the I'm not sure if I'm going to be able to do that, but I think I'm going to be able to do it," he said.
When comparing, we found that the general trend of each index is basically the same, from the base date to the present, less than 16 years, the annualized rate of return is not much difference, they are all in the range of 18.5% ~ 20%.
However, there are large differences in the localized ups and downs of several indices, which is normal, mainly due to the different sensitivities of large-cap and small- and mid-cap indices to bulls and bears.
The table below lists the year-to-date returns for each index from September 3, 2019, and the year-to-date returns from the base date. (Since the Pharma 50 was released on September 3, the starting date for comparison is September 3)
From the table, we can see that the Pharma 50 has been the top performer of all the indices in terms of both the September 3 year-to-date and the base date-to-date returns, pulling away from the rest of the indices by a wide margin. The inclusion of corporate profitability in stock selection has had a positive impact on the index.
The 300 Pharmaceuticals, which is also characterized as a large-cap leading index, performed relatively poorly.
The CSI Pharma and SSE Pharma also performed worse than the CSI Pharma. As mentioned in the previous section, the three indices have similar characteristics, so if I had to choose one of the three, I would recommend giving preference to the CSI Pharma index.
The remaining two indices are the 500 Pharma, which is entirely small- and mid-cap, and the All Share Pharma, which covers large- and small-cap pharma stocks, and I would recommend the All Share Pharma over the other two from a solid standpoint.
Observing the trend of the large-cap and small-cap indexes in recent years, the trend of the strongest has begun to emerge, and a few of the headline companies in each industry are generally more sought after by the funds, and with the further increase in the number of listed companies in the A-share market, the future may be even more serious.
In summary, the recommendation is to prefer the Pharmaceutical 50 Index, followed by the CSI Pharmaceuticals, and then the All Ordinaries Pharmaceuticals.
(1) Indices with OTC funds available
Of the seven indices, only four have OTC funds available.
The Efonda CSI 300 Pharmaceuticals & Healthcare ETF Connect A/C, which tracks the 300 Pharmaceuticals Index, has a fund code of 001344/007883.
There are more OTC funds tracking the CSI Pharmaceuticals Index, however, they are all relatively short-lived and the fund sizes are very small, of which the ETF CSI Pharmaceuticals ETF Connect A/C is slightly better than the others, after all.
Finally, there are three OTC funds tracking the All Ordinaries Pharmaceutical Index, one enhanced index fund and two ETF-linked funds. After performance comparison, I prefer GF Pharmaceuticals & Healthcare Connected A/C, fund code 001180/002978.
Combined with the previous part of the historical performance comparison and the index funds, OTC I recommend to prioritize the Cathay Pacific CSI Pharmaceuticals & Healthcare Sector Index Segmented, fund code 160219.
(2) On-exchange Funds
In addition to the CSI Pharmaceuticals Index, the other six indices are all investable by their respective on-market ETF funds, which are screened and sorted into the table below:
Again, combining the historical performance of each index with the tracking funds, I give the following personal recommendation after comprehensive consideration:
Prioritize the Fortune China CSI Pharmaceuticals 50 ETF, with a fund code of 515950, even though the size of the fund is slightly lower, but such a size is barely acceptable, but from the perspective of indexing rules and performance, the pharmaceutical 50 index is better than the 300 pharmaceuticals with other indices.
Secondly, you can also consider the GF CSI All-Index Pharmaceuticals and Health Trading ETF, the index compilation rules from the perspective of the index, if you are not sure which style of large-cap and small-cap would be better, the All-Index Pharmaceuticals is a relatively middle-of-the-road choice, the historical performance of a few indexes is also relatively advanced, and the fund was established for a long time, and the size of the fund is also more appropriate.
In this issue, we have compiled a list of all pharmaceutical and healthcare funds and analyzed and compared seven of them in the broader pharmaceutical and healthcare category, to select the indexes and tracking funds that are more suitable for investment. We hope this issue will help you in picking pharmaceutical index funds.