Hong Kong benchmark compiler Hang Seng Indexes proposes increase in constituent stocks for ‘reasonable representation for each industry’
- Increasing constituents to between 65 and 80 can ‘achieve a reasonable representation for each industry’: Hang Seng Indexes
- Proposal seeks at least 25 Hong Kong firms as constituent stocks to address concerns about falling representation
Hang Seng Indexes, which compiles Hong Kong’s benchmark index, is seeking an increase in the number of constituent stocks in its second major revamp in eight months.
The change, proposed in a consultation paper released on Tuesday, will help it meet the requirements of a drastically changed stock market, one that is now dominated by big technology companies.
The index was started with 33 constituent stocks in 1969. Hang Seng Indexes will collect views until January 24 and announce the result in February.
The proposed changes are expected to better reflect the complexion of the Hong Kong stock market. The Hang Seng Index, which started adding big technology companies after a revamp in May this year, continues to be dominated by financial companies and is viewed as outdated. Moreover, the market capitalisation covered by companies that are included in the gauge has decreased from 65 per cent in 2016 to 56.7 per cent now.
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The total market capitalisation of the Hong Kong stock market has grown by 458 per cent from HK$8.2 trillion (US$1.06 trillion) in 2005 to HK$45.6 trillion in 2020. Over this period, the proportion of mainland Chinese companies listed in the city has also increased, from 41.6 per cent to 79 per cent.
