What is Free Cash Flow?
Free cash flow measures the cash that a company can freely allocate, which is the funds that the company can flexibly use, reflecting the true quality of the company's earnings.
To put it simply, if you run a supermarket and generate 1 million yuan in cash over a year, and you spend 300,000 yuan to renovate the store and replace shelves, the remaining 700,000 yuan is free cash flow. This money can be used for dividends, expanding the store, or saved, giving you complete discretion.
Companies with high free cash flow often have the following characteristics:
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Stable shareholder returns, with the ability to pay dividends or repurchase stocks.
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Financially healthy, manageable debt, and strong risk resistance.
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Mature business model, deep &#34;moat,&#34; and stable operations.
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What are the differences among the three major free cash flow indices?
Currently, the well-known free cash flow strategy indices in the market are the CNI Free Cash Flow Index, CSI All Share Free Cash Flow Index, and FTSE China A Free Cash Flow Focus Index.
CNI Free Cash Flow Index: First, it excludes the bottom 20% of securities ranked by average daily trading volume over the past six months and removes securities from the financial or real estate sectors with special cash flow models. Secondly, it requires companies to have positive operating cash flow for three consecutive years and introduces dual screening based on &#34;ROE stability&#34; and &#34;cash flow/profit ratio.&#34; Finally, it ranks the stocks by free cash flow rate from high to low and selects the top 100 stocks as constituent stocks.
CSI All Share Free Cash Flow Index: It also excludes the financial or real estate sectors and requires positive net cash flow from operating activities for five consecutive years, indicating high earnings quality. Finally, it selects the top 100 stocks ranked by free cash flow rate from high to low as constituent stocks.
FTSE China A Free Cash Flow Focus Index: Similarly excludes the financial or real estate sectors and requires positive free cash flow over the past year, using quality factors for screening, focusing on 50 high cash flow companies.
Main differences among the three:
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<li>Different years of positive cash flow required:</li>
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FTSE requires positive free cash flow for the past year, CNI requires positive operating cash flow for the past three years, and CSI requires positive operating cash flow for five consecutive years, which is a longer time frame.
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<li>Different number of constituent stocks and concentration:</li>
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Both CNI and CSI have 100 constituent stocks, while FTSE has only 50, making the impact of the performance of heavy-weight stocks greater. This also explains why the top ten constituent stocks in FTSE account for the highest proportion, over 60%, while the other two are around 50%.
Comparison of the top ten constituent stocks of the indices
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O3tRyV6FARsRimDWmZsVe9OEvbB7aAB_yKCsfZH5z0Pg8AA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O3tRyV6FARsRimDWmZsVe9OEvbB7aAB_yKCsfZH5z0Pg8AA/641"/>
Data source: Wind, as of March 26, 2026
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<li>Different dimensions for negative exclusion:</li>
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The FTSE Free Cash Flow Index focuses on volatility (excluding the lowest 30% of securities by volatility); the National Index Free Cash Flow Index emphasizes the stability of earnings and cash conversion ability (excluding the bottom 10% in ROE stability ranking over the past 12 quarters and the bottom 30% in operating cash flow/operating profit ranking); the CSI All Share Free Cash Flow Index has no tail exclusion requirements and focuses on the number of consecutive profitable years.
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<li>The top five heavily weighted industries:</li>
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The top five heavily weighted industries include automobiles, non-ferrous metals, and home appliances, but with different weights. The National Index heavily weights automobiles, with significant proportions in oil and petrochemicals, non-ferrous metals, and power equipment, focusing more on high-end manufacturing and consumer recovery logic, which may have greater cyclical explosive potential in economic recovery; the FTSE heavily weights home appliances, which belong to the real estate late cycle; the CSI's top five industries have a relatively balanced proportion, uniquely including transportation, which diversifies the risk of concentration in a single industry.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OrWfcv2eBDU9fKjcuI29IkhgKer0LI3t_r4Ngu2lJ3uKoAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OrWfcv2eBDU9fKjcuI29IkhgKer0LI3t_r4Ngu2lJ3uKoAA/641"/>
Note: Data source Wind, Shenwan first-level industries, as of March 26, 2026
Investment logic of the Free Cash Flow Index: suitable as a &#34;core&#34; allocation
Compared to inflated book profits, free cash flow is more &#34;real.&#34;
Companies that can continuously generate free cash flow often have a deep economic moat and are high-quality assets that can withstand cycles. When investing, one can consider free cash flow index products as the &#34;ballast&#34; of the account, striving for long-term stable returns.
Currently, among the 25 index funds tracking the National Index Free Cash Flow Index, the free cash flow ETF E Fund (159222) has a lower fee rate (management fee 0.15%, custody fee 0.05%). As a long-term core allocation, it can save a significant amount in fees. For example, comparing with similar products on the market with an annual fee rate of 0.6% (management fee 0.50%, custody fee 0.10%), taking a holding of 1 million as an example, holding for 5 years can save about 20,000 yuan in fees, and holding for 10 years can save about 40,000 yuan. If compounded interest effects are added, the long-term difference will be even more significant.
Risk warning: Funds have risks, and investment should be cautious

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Free cash flow is the cash that a company can freely allocate, reflecting the true quality of its earnings. Companies with high free cash flow typically have stable shareholder returns, healthy finances, and mature business models. There are three major free cash flow indices in the market: the CNI Free Cash Flow Index (requiring 3 years of positive cash flow), the CSI All Share Free Cash Flow Index (requiring 5 years of positive cash flow), and the FTSE China A Free Cash Flow Focus Index (requiring 1 year of positive cash flow). The main differences among the three lie in the number of years of positive cash flow and the number of constituent stocks

腾讯新闻 - 财经

Founder Fubon CSI All Share Free Cash Flow ETF

China Merchants CSI All Share Free Cash Flow ETF

Bosera CSI All Share Free Cash Flow Index Exchange Traded Fund

Guotai FTSE China A Free Cash Flow Focus ETF

Harvest CNI Free Cash Flow ETF

Harfor CSI All Share Free Cash Flow ETF

GTJA Allianz CSI A100 Index Fund(LOF)

CS CASH FLOW ETF

Huaan CSI All Share Free Cash Flow ETF

E Fund CNI Free Cash Flow ETF

Huatai-PB CSI All Share Free Cash Flow ETF

ChinaAMC CNI Free Cash Flow ETF

Key points summary, what are the differences among the three free cash flow indices?