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Hang Seng Index
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Hong Kong expands benchmark stock index, prepares money managers for major revamp with US$68 billion at stake

  • Alibaba Health Information, Longfor and Haidilao to join Hang Seng Index on March 15, stocks rally by 2.4 per cent to 7.5 per cent in reaction
  • Index compiler to disclose plans on benchmark revamp that could impact US$68 billion tracking family of Hang Seng indices

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Hang Seng Indexes Company will add three new benchmark members from March 15, while another round of index reconstruction may be in store. Photo: Bloomberg
Zhang Shidongin Shanghai
Hong Kong’s stock market will add three stocks to the blue chip index in a month when the benchmark compiler is readying investors for one of the biggest makeovers since its inception in late 1969. 
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The compiler, Hang Seng Indexes Company, added Alibaba Health Information, Longfor Properties and Haidilao International after its quarterly review, raising the constituents to 55 with effect from March 15. The move will add US$124.5 billion, or about 8.5 per cent to the current index capitalisation. The trio advanced by at least 2.4 per cent in reaction.

Ten stocks were added to the benchmark gauge in quarterly reviews over the past three years, with nine rising by 2 per cent to 6.6 per cent immediately after the announcements. Seven of the eight that exited the index declined by 1.6 to 5.8 per cent.

Money managers with almost US$68 billion tracking Hong Kong’s main stock indices will have another reason to pay closer attention this week after the market sell-off last week. The compiler is set to unveil the results of its public consultation about index reconstruction later Monday. Among others, it has proposed to boost the index to between 65 and 80, limit each stock weightage to 8 per cent, and widen the industry representation.

“The quarterly rebalancing review will not cause much volatility and we need to pay attention to the results of the consultation,” said Bruce Pang, head of macro research at China Renaissance Securitie. “If the compiler is determined to proceed with the reform, that will cause some repercussions in the market.”

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