Hang Seng Index

Hang Seng Index kicks off biggest overhaul

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On June 7, a long-awaited revamp of the Hang Seng Index (HSI) will see the Hong Kong financials-heavy benchmark expand from 55 to 58 names, with the addition of Warren Buffett-backed auto and battery maker BYD, solar panel glass manufacturer Xinyi Solar Holdings, and real estate services company Country Garden Services.

The overhaul of the HSI, first announced in March, is part of a plan to broaden the key gauge of Asia’s second-largest capital market from 55 to 80 by mid-2022,  when it will cover around 71% of the Hong Kong stock market (versus 57% today).

The HSI, which includes the largest and most liquid stocks listed in Hong Kong, will add five new stocks each quarter, for five successive quarters, adding firms from underweight sectors and reducing the impact of the city’s biggest companies.

HSI constituents will be based on industry groups, regardless of market capitalisation and will be selected from seven industry groups including financials, information technology, healthcare, industrials and conglomerates, energy, utilities and telecommunications, and consumer and staples, with the aim of achieving a more balanced representation of the Hong Kong stock market.

The revamp limits a stock’s weighting to 8% and also shortens the listing history requirement for a company to be included. New stocks will need just three months of trading before they’re up for inclusion, regardless of size.

Fund managers foresee the index’s performance to improve as a whole with more diversified constituents and a higher weightage of new-economy stocks. There are around US$38bn of funds that follow the Hang Seng group of indexes, according to data compiled by Bloomberg.

Hang Seng Index

Hang Seng Indexes Company Limited manages and compiles the Hang Seng Family of Indexes, which cover stocks listed in Hong Kong and Mainland China. Its index series includes the Hang Seng Index, the Hang Seng China Enterprises Index and the Hang Seng TECH Index, as well as Stock Connect, Greater Bay Area and sector-related indexes. As at the end of 2020, assets under management in products passively tracking indexes in the Hang Seng Family of Indexes had reached a total of about US$38 billion. Last year, the HSI lagged global peers by the most in decades. Technology stocks sharply underperformed the benchmark. Hang Seng Indexes Company is a wholly owned subsidiary of Hang Seng Bank.

Hang Seng index ended marginally higher at 29,151.80 on Monday (May 31) as Asian stocks ended mixed, with a stronger-than-expected U.S. inflation reading and mixed data from China and Japan keeping underlying sentiment cautious. China’s official manufacturing Purchasing Managers’ Index for May came in at 51.0, a slight decrease from the previous month’s reading of 51.1.

Japan’s retail sales jumped by 12 percent year-on-year in April 2021 according to government data, compared with market expectations of a 15.3 percent gain and after a 5.2 percent rise a month earlier.