✅ Why should I trade the China A50?

The China A50 is an excellent way to access the Chinese markets and take advantage of one of the fastest growing economies in the world. In fact, because the A Shares included in the index are highly regulated and access is limited to a small number of institutional participants the A50 is one of the only ways for retail investors to enter this part of the Chinese financial markets. In fact, both institutional and retail investors all around the world use the A50 to participate in China’s speculative financial markets.

✅ What’s the best strategy for trading the China A50?

As is the case with any trading, the best strategy is the one that fits the trader’s personality. It also needs to fit the market. Different strategies will be appropriate depending on whether the market is trending or consolidating. There are also seasonal factors that can be taken into consideration. In general day traders will want strategies that get them into and out of the market rapidly. Some traders will appreciate the profit potential offered by breakout strategies. These may not offer as many entry points, but catching an early trend can be very powerful.

CHINA A50 Trading

What is the China A50? | AvaTrade Tutorial

The China A50 Index is a stock market index introduced by FTSE that hosts A-Share companies from both the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

What is the China A50 Index?

The China A50 is an index for 50 stocks of companies with the highest market capitalisation listed on the Shanghai and Shenzhen stock exchanges. China A50 was introduced by FTSE Russell to track the performance of A-listed company shares as well as to offer a definitive benchmark for equity investment in Mainland China.

The index popularity has coincided with increased demand for Chinese investments as the country moved from being an emerging markets country only a few decades ago, to now becoming a global economic giant.

Open your trading account at AvaTrade or try our risk-free demo account!

A-shares constitute companies which are listed on the Shanghai and Shenzhen stock exchanges, and they are denominated using the local Chinese currency renminbi (RMB). For investors, A-shares represent the best stocks available in China as a result of a rigorous enlisting procedure as well as a diverse sector representation.

FTSE Russell has also introduced various other indices in other global equity markets such as the BRIC 50, Blossom Japan, ASFA Australia, and ASEA Pan Africa, Russell 2000.

China A50 trended sideways at the turn of the century, making a trough at circa 3670 in January 2005. It then turned higher strongly as the Chinese economy posted supernormal growth and managed to print an all-time high of circa 23,160 in January 2007.

The subsequent global financial crisis weighed down on the index, which tumbled to a low of circa 6070 by January 2008. A mild recovery would follow, pushing the index to above 13,000 by January 2009. Since then, the index has maintained a sideways trajectory, and as of November 2019, it was trading at just below 14,000.

Index Composition and Calculation

China A50 is a free float, capitalisation-weighted index. Market capitalisation determines inclusion in the index, and free float means that the calculation involves only outstanding shares available to the public. This ensures that the overall price of the index accurately represents the true opportunity available to an investor.

To be included in the index, a company must meet the conditions below:

Its float-adjusted market capitalisation must be among the top 50 companies in China
It must have a free float of more than 5%
It must be sufficiently liquid. It must have a daily median trading volume of at least 0.04% of its shares every month for the last 8 months.

FTSE Russell rebalances the index quarterly in March, June, September and December to ensure it continuously reflects the equity performance in China.

The index is calculated to 12 decimal places, but for easier trading and investment purposes, it is published with 2 decimal places. FTSE Russell uses actual trade prices for securities with local stock exchanges and applies forex rates supplied by Reuters in real-time.

Here are the top 5 sectors represented in the China A50:

Sector	Weight (Average)	Importance
Banks	44%	China’s banking sector is the largest in the world
Life Insurance	13%	Life insurance has seen exponential in China since 2008
Consumer Goods	12%	China’s demographics and long-term economics make it an eternal huge consumer goods market
Industrials	11%	Industrial activities contribute 40% to the Chinese GDP
Financial Services	11%	Investment and other speciality finance services have benefitted from a more conducive business environment in China

There are a few other derivatives based on the China A50 index such as the Singapore China A50 futures. FTSE has also launched other indices for the Chinese equity markets such as China All Means, China A200, China A400, China A600, FTSE China B Share All Cap, FTSE China (HK Listed), FTSE Greater China All Cap, FTSE China A Innovative Enterprises, and FTSE China Overseas All Cap.

Factors Influencing the Overall Index Price of the China A50

Its wide sectoral composition ensures that multiple factors can influence the overall price of the China A50 index. A significant change in the price of a major constituent, such as Ping An Insurance or China Minsheng Bank, will have an impact on the overall price of the index. As well, a change in any big sector, such as Financials, will also impact heavily on the index’s price.

Major events that shake stock market will also impact on the benchmark stock index. This was evident during the 2008 global financial crisis when the index tumbled by more than 50%. The back and forth trade talks between the US and China in 2019 also limited any growth on the index for a couple of months.

The Chinese monetary environment will also have an impact on the index. The Bank of China (Chinese Central Bank) has never shied away from using its rich policy toolkit to control the economy in the form of changing interest rates or bank reserve requirement ratios. Lower rates, for instance, will always excite the stock market and inspire higher prices for the China A50 index.

Why Trade the China A50 Index?

Liquidity – The China A50 index represents the biggest companies in China, which makes it a highly liquid asset due to the amount of activity taking place in individual stocks.

Fewer price shocks – There is smooth price action in the China A50 index because the computation method ensures no single stock can significantly impact on the overall price of the index. As a result, there is also no risk of big price gaps.

Diversification – The China A50 index offers immense sectorial diversification to investors. The sectors available include financials, automobiles and industrial.
Vast news coverage – There is massive news coverage of the China A50 index, which is the foremost equity index in the Asian giant. This makes both fundamental and technical analysis a lot easier.

Benefits of Trading China A50 CFDs with AvaTrade

There are many benefits to trading the China A50 index as a CFD (contract for difference). Here are some of the many advantages of trading the China A50 Index CFDs with AvaTrade:

Enjoy the security of trading online with a globally regulated forex trading broker
Competitive spreads – No commissions are charged

Access to powerful trading platforms (MT4 and MT5 available as well as AvaOptions, Mac Trading and mobile trading App)
Globally multi-regulated broker
Leverage of up to on the China A50 index
Outstanding multilingual and responsive customer support
Comprehensive education centre and trading tools
Flexible and secure payment methods
Free demo account
Quick and easy deposits and withdrawals process
At AvaTrade, you can access a choice of trading instruments, including commodities, stocks trading, forex trading, crypto trading, indices, bonds & ETFs.

CHINA A50 Trading Main FAQs

What is the China A50?
The China A50 is a stock index that was created by the FTSE Group to track the 50 largest A Share stocks listed on the Shanghai Composite and Shenzhen Composite in China. It is thought of as a benchmark index allowing investors access to the Chinese financial markets. Because China has the world’s largest banking sector, the banks are heavily represented in the A50 index, with roughly 44% weighting for the banking sector. In addition to such massive banks as China Construction Bank and the Agricultural Bank of Beijing, the A50 also includes shares of companies such as China State Construction, China Shipbuilding Industry, and PetroChina.
Why should I trade the China A50?
The China A50 is an excellent way to access the Chinese markets and take advantage of one of the fastest growing economies in the world. In fact, because the A Shares included in the index are highly regulated and access is limited to a small number of institutional participants the A50 is one of the only ways for retail investors to enter this part of the Chinese financial markets. In fact, both institutional and retail investors all around the world use the A50 to participate in China’s speculative financial markets.
What’s the best strategy for trading the China A50
As is the case with any trading, the best strategy is the one that fits the trader’s personality. It also needs to fit the market. Different strategies will be appropriate depending on whether the market is trending or consolidating. There are also seasonal factors that can be taken into consideration. In general day traders will want strategies that get them into and out of the market rapidly. Some traders will appreciate the profit potential offered by breakout strategies. These may not offer as many entry points, but catching an early trend can be very powerful.

Are you ready to trade the benchmark China A50 index? Sign up at AvaTrade now and start today!

Related Indices