What is the difference between the Three All Market Stock Selection Free Cash Flow Index?

Since the beginning of 2025, the A-share Free Cash Flow Index has officially entered ETF investors’ radar as a type of innovative strategy. In just over a year, the track has expanded rapidly. As of March 31, 2026, there are already 30 ETFs tracking indices related to cash flow across the whole market, with an overall scale of more than RMB 45 billion.

Entering 2026, in a market environment of real re-acceleration of inflation, attention to the Free Cash Flow strategy continues to rise. As investors become increasingly familiar with this concept, their focus has also become more granular: What exactly are the differences among various free cash flow indices? Today, we will zero in on three free cash flow targets for selecting stocks across the whole market— the Guozheng Free Cash Flow Index (980092.CNI), the CSI All-Share Free Cash Flow Index (932365.CSI), and the FTSE China A-share Free Cash Flow Focus Index (888888.FI) (below, abbreviated as Guozheng, CSI, and FTSE respectively)—and explore their differences in depth.

1. “Stock-picking code” fully unraveled

Free cash flow is the net amount of cash flow that a company can freely dispose of after deducting capital expenditures. By using this metric to screen for stocks with high earnings quality and strong resilience to the business cycle, it can support sustainable dividends through relatively stable cash flow, and also capture comparatively better long-term returns through growth potential driven internally. Therefore, free cash flow can serve as a core metric for assessing a company’s true earnings quality and value-creation capability.

In the current market, most free cash flow indices use free cash flow yield (free cash flow / enterprise value) as the core stock-picking indicator. They select stocks with a high “cash-flow value-for-money,” rather than simply those with high absolute cash flow. Fundamentally, it reflects a dual logic of combining high free cash flow with low valuation.

Overall, the three—Guozheng, CSI, and FTSE—are broadly similar in their index construction schemes. All three start from stocks with better liquidity across the entire A-share market, exclude the financial and real estate industries, prioritize stocks with higher free cash flow yield, apply free cash flow weighting, set a 10% individual stock weight cap, and rebalance each quarter. The main differences lie in the rules for negative screening:

Guozheng additionally requires ROE stability: it excludes 10% of companies after screening out those whose ROE fluctuates over the most recent 12 quarters. At the same time, it sets a stricter threshold for the operating cash flow / operating profit ratio, reflecting greater emphasis on earnings quality.

CSI places greater emphasis on the continuity of cash flow: it requires that operating cash flow has been positive for five consecutive years. In addition, when screening out based on earnings quality, it applies a stricter constraint to high-debt, high-leverage companies by dividing the relevant metric by total assets on the denominator side.

FTSE integrates quality, volatility, and growth across three dimensions. It adopts FTSE’s proprietary factor framework and more reflects the stock-picking standards for A-share cash flow from the perspective of overseas investors.

Table: Comparison of index construction schemes for different free cash flow indices

Note: Data comes from the index providers’ official websites, as of March 31, 2026

2. “Holdings profile” fully exposed

After clarifying the differences in construction logic, we’ll next look directly at how the holdings profiles of the three indices differ in terms of industry and market-cap distribution. Overall, the three cash-flow indices have relatively balanced coverage across industries and market-cap sizes, with moderate concentration and a market-cap structure tilted toward mid-to-large caps.

Table: Comparison of market-cap distribution across different free cash flow indices

Note: Data comes from Wind, as of March 31, 2026

In terms of industry allocation, CSI and Guozheng have similar weightings. The top four industries are automobiles, home appliances, petroleum & petrochemicals, and transportation. Among them, CSI’s automobile industry accounts for about 13.7%, making it the largest industry; transportation, petroleum & petrochemicals, and home appliances follow with weights of 12.4%, 9.8%, and 9.1%, respectively. Guozheng, based on a similar industry structure, slightly overweights the automobile sector to 19.7%; the combination of cyclical and manufacturing sectors is reasonably balanced. Due to the impact of the growth-dimension screens, FTSE overweights home appliances (18.6%) and communications (12.1%) to a greater extent, and basically does not include petroleum & petrochemicals.

Figure: Industry comparison across different free cash flow indices

Note: Data comes from Wind, as of March 31, 2026

3. “Real-world performance” showdown

After discussing construction logic and holdings profiles, ultimately you still need to focus on the hard metric of performance—so let’s see how the three indices perform under different market environments.

From a long-term perspective, the performance of Guozheng and CSI is highly similar. Since 2014, Guozheng Free Cash Flow has achieved annualized returns of 20.7%, while CSI All-Share Free Cash Flow has achieved 20.4%. Their Sharpe ratios are both 0.90, outperforming the FTSE China A-share Free Cash Flow Focus Index’s annualized return of 18.6% and Sharpe ratio of 0.85.

Figure: Performance comparison across different free cash flow indices

Note: Data comes from Wind, from January 1, 2014 to March 31, 2026, using total return indices

Taking a closer look at the comparison between Guozheng and CSI, from the year-by-year return performance, we can see that in bull markets where the market rises broadly, Guozheng’s offensive aggressiveness may be slightly less than CSI’s. However, once the market enters a downward adjustment phase, Guozheng’s downside-resilience attributes become more prominent. This is especially evident in the three consecutive bear years from 2021 to 2023: Guozheng Free Cash Flow achieved positive returns for three straight years, demonstrating relatively strong performance resilience.

In summary, although the three whole-market stock-selection free cash flow indices share the same general origin, each has its own emphasis. Guozheng and CSI are more “pure” value-style indices, with long-term performance leading over FTSE’s cash-flow index that incorporates growth factors. Specifically, however, the Guozheng Free Cash Flow Index, by screening for more stringent earnings stability, shows better downside resilience during down markets.

Since 2026, the market has continued to fluctuate and adjust, with hotspot rotation accelerating, making the importance of downside resilience for indices more prominent. As of March 31, 2026, the Guozheng Free Cash Flow Index’s year-to-date return is 7.4%, having carved out an independent trend in a choppy market, highlighting its allocation value of “winning by stability.”

For investors who want to build a cash-flow strategy and reinforce their portfolio with a stabilizing core, it may be worth focusing on the Free Cash Flow ETF by E Fund tracking the Guozheng Free Cash Flow Index (code: 159222), as well as the corresponding index-linked fund (Class A: 024566, Class C: 024567). With a disciplined true-earnings strategy, it helps you navigate market volatility and capture long-term value.