The Shanghai and Shenzhen stock exchanges are expected to release a long-awaited unified index at an appropriate time, but probably not so soon as some reports have predicted, insiders said Wednesday.

There have been reports recently that the unified index, a new barometer to trace the more than 1,300 companies listed in Shanghai and Shenzhen, would be launched at the end of this month, but insiders said the timing is no longer a sure thing now and may be postponed until the performance of the market improves.

The technical preparations for the unified index have been completed, but it is up to the top financial authorities to decide when to launch the index, according to a senior official at the Shanghai Stock Exchange.

Regarding the constituents of the unified index, he said it would cover stocks listed both in Shanghai and Shenzhen, though Shanghai-listed stocks may be in the majority.

The unified stock index, jointly developed by the Shanghai and Shenzhen bourses, has been prepared for a long time. It is regarded as a new benchmark that will give a more comprehensive reflection of the market movements of both bourses.

It will also pave the way for the introduction of more index-based innovative products, such as index futures, which are expected to offer investors more tools to hedge risks.

The Shanghai Stock Exchange official said a lot of research and studies on index futures had also been conducted and the exchange looks forward to the early launch of the product.

The Shanghai and Shenzhen stock exchanges each currently have a series of indices to track locally-listed stocks, but they remain separate. Only a number of securities institutions have developed their own brand indices that trace stocks in both exchanges, such as the S&P/CITIC 300 index, which was jointly developed by Standard & Poor's and CITIC Securities to trace the overall performance of A shares.

But such corporate-designed indices are still not widely used. The most quoted benchmark now is still the Shanghai composite index.

"Each index designer will have their own method of design, so the launch of the new index will not have much affect on the use of other indices but enrich product diversification. Investors can choose which index to apply to trace market movements," said Luo Lin, head of the index development team of CITIC Securities.

Apart from market capitalization and liquidity, the fundamentals of the listed companies and their representativeness in their industries will also decide whether they will be chosen as the constituents of a benchmark index, said Luo.

China's stock market has been bearish for nearly four years. After a brief rebound on Monday, the market lost strength again on Tuesday and yesterday. The Shanghai composite index once again plunged below the psychologically important 1,200-point level in early trading yesterday, hitting an intraday low of 1,194.32 and closing down 0.44 percent at 1201.65.

Some have expected the introduction of the unified index to give a boost to the market. However, it is impractical to expect any new products to exert a long-lasting stimulus on the bourses or change the listed companies' performance overnight, experts said, as they need more market-driven reforms to change their fundamentals.

On March 14, Premier Wen Jiabao said at a press conference that the government would take measures to improve the quality of listed firms, enhance market transparency, crack down on irregularities and speculations, and protect the interests of public investors.

While Wen's remark showed the government's determination to reform the capital market, investors are still expecting more concrete reform plans, like a fair and transparent programme to reduce and circulate State holdings in listed firms with appropriate compensation to the public shareholders, said an analyst from Guotai & Jun'an Securities.

(China Daily March 24, 2005)