Hong Kong’s stock exchange is getting an index to track the performance of technology companies as their dominance grows in Asia’s third-largest capital market following several mega listings in recent months.
The gauge, known as Hang Seng Tech Index, will include the largest 30 of 163 such entities which command a combined HK$12.21 trillion (US$1.58 trillion) or just under one-third of the market capitalisation. The index will debut on July 27, according to compiler Hang Seng Indexes Company.
The index takes a greater significance as Ant Group unveiled on the same day a concurrent plan to seek a listing in Hong Kong and Shanghai. Ant could be the world’s most valuable financial technology company, and its listing will follow after recent “homecoming” of Alibaba Group Holding, JD.com and NetEase, among others.
Ant Group, which bankers said is worth about US$200 billion, is an affiliate of Alibaba, which owns the South China Morning Post.
“We developed the Hang Seng Tech Index to meet the fast-growing interest in this investment theme among investors,” Anita Mo, deputy chief executive of the compiler, said in a statement. “The Index aims to reflect the performance of sizeable companies in this sector, and to facilitate the development of various index-linked products, including funds and derivatives.”
Hang Seng Indexes Company is a subsidiary of Hang Seng Bank. It started compiling the benchmark Hang Seng Index 50 years ago and has since developed more than 800 sub-indexes to cover a wide range of sectors and industries.
In the new tech index, Alibaba and Tencent Holdings are the top two constituents, while Meituan Dianping, Xiaomi and Sunny Optical complete the top five. Their index weighting will be capped at no more than 8 per cent each, the compiler said. New members may be added on a fast track basis 10 days after their listing, it added.
Based on simulation, the tech index would have risen 45.5 per cent this year through July 20, and 36 per cent in 2019, according to index compiler. In comparison, the Nasdaq Composite Index rose 17 per cent this year and 35 per cent in 2019, it said.
Their influence had earlier prompted the index compiler to conduct a public consultation to elicit responses from investors about including such technology behemoths into the flagship Hang Seng Index of 50 companies.
The new tech gauge is seen as an essential tool to guide global stock investors as the influence of predominantly Chinese technology companies in the Hong Kong market has grown by leaps and bounds. Hong Kong’s importance as a fundraising hub has also been elevated amid an escalation in US-China political and economic issues.
“The exchange will soon have exchange-traded funds and other derivative products linked to the new tech index for trading and hedging," said Louis Tse Ming-kwong, managing director of VC Asset Management. “It is important as we are going to see more technology company listings in Hong Kong, in light of the US and China political tensions.”
There are currently 163 tech stocks listed on the Hong Kong exchange, compared with 137 in 2017. Hong Kong Exchanges and Clearing, the bourse operator, began to embrace them in 2018 by reforming its rules on companies with dual-class shareholding structure.
There were 2,487 listed companies in Hong Kong at the end of June, according to exchange data, with a total market capitalisation of HK$37.9 trillion. Among them, 1,265 are mainland companies that made up 78 per cent of market value and 81 per cent of turnover.
The inception on July 27 will also follow a move by the Shanghai Stock Exchange operator to unveil a similar index for the local bourse. The gauge will track companies on the nascent Star Board, where the nation’s biggest chip maker, Semiconductor Manufacturing Industry Corporation tripled on its debut last week.