After more than three decades of having the same relative system in place for its benchmark index, the Shanghai Stock Exchange is reportedly considering a massive overhaul that would make the index more in line with its foreign counterparts. According to sources with knowledge in the matter, the proposed alternations are meant to make the index better reflect China's evolving economy.

Sources claim that one of the most significant changes that are being planned is how a company's market value will be calculated. The exchange is proposing that a company's values should be based on its free-floating stocks rather than its total outstanding shares. The mechanism is similar to that of other indexes such as the United States' S&P 500. Through this method, emphasis on closely held stocks by insiders would be reduced.

If this will end up being approved, there will be a massive shift in values, with an increase in weightings for tech and new economy-related firms and a reduction in financial and energy-related listings. Analysts at the Reality Institute of Advanced Finance pointed out that the move to overhaul the Shanghai Composite Index may have been influenced by the ongoing criticism of how it does not properly reflect China's real economy. The company added that any sudden changes will have to be carefully considered as multiple funds are actively tracking it.

Apart from how it would calculate values, the exchange is reportedly also considering an adjusting in the timing of newly listed stocks and the possible removal of continually loss-making shares. The exchange is reportedly also evaluating a proposition to include several listed stocks on its tech innovation board, or StarBoard, into the index. Insiders claim that the proposed changes are still being reviewed and no concrete decision has yet been made.

Since it was launched in 1991, the Shanghai Composite Index has remained relatively stagnant, hovering around the 3,000-point mark over the last decade. In comparison, the S&P 500 has surged by more than 171 percent over the same period. Analysts point out that the index has failed to really capture the change in China's rapidly growing new sectors, as it is still tracking mostly financial and energy firms. The index currently tracks 1,555 stocks on the exchange.

Experts at Shanghai Zhuozhu Investment Management stated that a revamp would break the curse of the Shanghai index, which has become an internal joke amongst investors. By focusing more on rapidly growing sectors, such as China's gargantuan tech sector, the index may better reflect the country's real economic state.