Alibaba arm launches stock index based on e-commerce deals
The dream of getting rich quick is luring more people into China's bullish equity market. But many of them have no clue about stock picking, and they need more than beginner's luck.
They might get some inspiration from Zhejiang Ant Small and Micro Financial Services Group Co Ltd, the finance arm of Alibaba Group Holding Ltd, which on Thursday launched a stock market index that tracks e-commerce activity to gauge listed companies' performances.
Ant Financial plans to use big data－the analysis of vast volumes of complicated information－to guide investment decisions.
The CSI Taojin 100 Index, the first to tap e-commerce data, includes 100 stocks in sectors ranging from garments to healthcare to beverages, Ant Financial said in a statement.
The index "weighs industries according to the growth in online transactions, price levels and the supply-demand situation in China", the company said. It expects that this analysis can offer insight into the futures and fortunes of many industries.
Ant Financial operates China's largest online payment tool Alipay, which has 180 million users.
The product is Ant Financial's latest innovation in Internet finance. The company was behind the popular online wealth management product Yu'ebao, another first that allows users to buy money market funds online and earn interest on a daily basis.
Bosera Asset Management Co Ltd, one of Ant Financial's partners in the index venture, said that Taojin 100 is a revolutionary product that has the Internet in its genes, rather than one that merely uses the Internet as a sales channel.
"Online shopping data are invaluable for making investment decisions as e-commerce transactions account for about 10 percent of retail transactions in China," said Bosera Vice-President Wang Deying.
"Compared with data from traditional financial institutions, these statistics are so much smarter. The index relies on fresh, quantitative data on online payments and transactions, rather than quarterly earnings."
The index began a test run at the start of the year, and it posted a yield of 41 percent in the first quarter.
Bosera will launch two funds linked to the index for investors later this year.
Analysts said that the CSI Taojin 100 Index will offer a great source of information on the nation's consumer market and give investors a better understanding of consumption trends.
"Big data technology is going to be a key component of investment decision-making in the future, because it allows for stronger forecasts to be made. Even now, funds are using big data in order to gain a stronger understanding of markets and industries," said Neil Flynn, portfolio manager at Alcuin Asset Management.
Prior to the CSI Taojin 100 Index, Baidu Inc launched a big data index fund in late 2014 by analyzing massive online search requests. Both moves are seen by insiders as ways to monetizing data.
Yu'ebao was a sensation when launched in mid-2013, and it has since become China's biggest fund, but Ant Financial is conservative about how popular the index fund will be.
Yuan Leiming, head of Ant Financial's finance department, told Reuters on Thursday that people still need to see the value of e-commerce data and the index has to gain acceptance.
Jiang Meifeng, a long-time A-share investor, expressed interest in the index. "My 20 years in the stock market have taught me that it is very difficult for individual investors to make big money."
"Behind every fund, there is a professional team. And their investment portfolio is much broader than mine. I think my money will be safer in their hands and save me a lot of time that I would otherwise spend staring at the computer."
