Hang Seng overhaul: Constituents to be doubled in major shake-up

A major overhaul of the The Hang Seng Index, Hong Kong’s most important benchmark, will begin in May. It will be the biggest overhaul of the index since it commenced more than half a decade ago.

The most significant move for investors is a major increase to the number of constituent stocks. By mid-2022 the number is set to increase from 50 to 80, with a broader target to fix the number at 100.

The shake-up will also see constituent stocks selected from seven industry groups, with a target to achieve a market capitalisation coverage of not less than 50% for each industry group. The groups are:

  • Financials
  • Information Technology
  • Consumer Discretionary & Consumer Staples
  • Properties & Construction
  • Utilities & Telecommunications
  • Healthcare
  • Energy, Materials, Industrials &Conglomerates

The groups will be reviewed at least every two years.

Anita Mo, Chief Executive Officer of Hang Seng Indexes Company, said she expects the Hang Seng overhaul will make the Index more balanced and diversified.

“Building on HSI’s market history of more than 50 years, these enhancements will ensure that the Index remains the most important benchmark of the Hong Kong stock market and will continue to grow and evolve to keep pace with the market,” said Ms Mo.

A press release from Hang Seng Indexes Company highlights additional changes including:

  • Relaxing the Listing History Requirement – The listing history requirement will be shortened to three months to provide flexibility for the timely addition of new listings.
  • Maintaining the Representation of Hong Kong Companies – Hang Seng Indexes Company will maintain 20 to 25 constituents that are classified as Hong Kong Companies in the index. The number of Hong Kong constituent stocks in the index will be evaluated at least every two years.
  • Adopting a Weighting Cap of 8% on All HSI Constituents – All HSI constituents, including weighted voting rights and/or secondary-listed constituents, will be subject to an aligned weighting cap of 8%. The same cap will be applied to the Hang Seng China Enterprises Index (‘HSCEI’).

All the changes will begin being implemented from the May 2021 and become effective in the June 2021 Index Rebalancing.