CXMT Photo: VCG

China's leading memory chipmaker ChangXin Memory Technologies (CXMT) has been officially included in the Shanghai Composite Index, overtaking ICBC to become the index's highest-weighted constituent with a weight of 4.67 percent, according to China Securities Index Co. The stock also tops the STAR Market Composite Index with a 15.74 percent weight.

The inclusion follows the index methodology set by the Shanghai Stock Exchange and China Securities Index Co. Newly listed companies that rank among the top 10 by average total market capitalization since their IPOs are admitted to the SSE Composite Index and STAR Market Composite Index after three months. CXMT met the three-month threshold on Tuesday.
 
Under the index rules, weight factors are adjusted on the trading day following the second Friday of each month, or when a newly added constituent's weight exceeds 15 percent.

As of the close on October 23, the top five constituents of the SSE Composite Index were ICBC, Agricultural Bank of China, PetroChina, Bank of China and Kweichow Moutai. 

Huayuan Securities noted in a recent research report that based on market capitalization rankings as of September 30 and listing tenure rules, the stock was expected to be included in the STAR 50, STAR ChiNext 50 and STAR Chip indices during the December regular rebalancing. Inclusion in major benchmarks such as the CSI 300 and CSI A500 requires CXMT to have been listed for a full year.

Huayuan Securities estimates that inclusion in the five indices could generate about 25.075 billion yuan ($3.76 billion) in buying demand for CXMT shares.

Industry insiders said that adding leading tech firms to broad market indices will help the benchmarks better reflect economic transformation and new growth drivers.

On one hand, tech firms drive higher revenue and profits through innovation, bringing new sources of growth to the market. On the other hand, the capital market supports their continuous research and development and industrial rollout. Investors can also more easily benefit from corporate growth via index investments. As this connection strengthens, the tech industry is likely to bring more lasting vitality to the market, Wang Peng, a research fellow at the Beijing Academy of Social Sciences, told the Global Times.

The inclusion of CXMT represents a natural structural upgrade for major A-share indices. Boasting a substantial market capitalization and core semiconductor credentials, the firm fits the profile of high-quality tech constituents. Benchmarks stand to benefit from adding more large-cap, stable and high-growth tech names such as CXMT, which is well-placed to advance this shift, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Wednesday.

Global tech markets see periodic moves that can affect cross-border investor sentiment. With CXMT now part of key indices, it helps anchor the domestic tech segment. While keeping an eye on global market trends, investors can focus on the fundamental outlook and valuation of domestic tech champions, Dong said.