Many investors have already seen the news: Hang Seng Indexes Company has issued a public consultation to seek feedback on changing the compilation methodology of the Hang Seng Tech Index. In simple terms, there are two key changes.
First, expanding the technology category to increase coverage. Second, introducing a grouped stock selection method, increasing the number of constituent stocks from 30 to 50. At the same time, Hang Seng Indexes Company has clarified that any related revisions to the Hang Seng Tech Index are expected to be announced by the end of September 2026 and implemented in the index review as of September 30, 2026. The final revisions are subject to the final decision of the Hang Seng Index Advisory Committee after considering the feedback from the consultation. Any related constituent stock changes will take effect during the December 2026 index adjustment.
To be honest, my feelings toward the Hang Seng Tech Index are "love deep, criticism sharp." I initially liked the Hang Seng Tech Index a lot, but later I found it problematic in two ways.
Why the index fell short
First, it claims to be comprehensive but isn't. The coverage of the Hang Seng Tech Index is incomplete. Looking at the name "Hang Seng Tech Index," most people would expect it to allow investment in high-tech companies listed in Hong Kong. But the reality is that the index's coverage is far from comprehensive. Second, it claims to be specialized but isn't. If it's not comprehensive, having high coverage of a specific sector would be acceptable, right? But investors find that the index mixes together companies like Tencent Holdings and Alibaba (internet enterprises), BYD and other new energy vehicle firms, and home appliance companies like Midea Group and Haier Smart Home, creating a hodgepodge. It claims to be comprehensive but isn't, and it claims to be specialized but is a mix of everything. I admit that home appliance companies like Midea Group and Haier Smart Home are excellent and have high technological content, but the original intention of many investors buying the Hang Seng Tech Index was largely driven by internet companies like Tencent Holdings and Alibaba.
Understanding investors' original intention for the Hang Seng Tech Index is precisely why the Hong Kong Stock Connect Internet ETF from Fullgoal Fund has emerged as the largest Hong Kong stock ETF in China. Now, it's not just the Fullgoal HK Stock Connect Internet ETF (159792); a host of fund companies are filing for Hong Kong Stock Connect Internet ETFs. There are also many fund companies filing for Hong Kong Stock Connect Information Technology ETFs. Similar ETFs include Hong Kong Stock Connect Auto Theme Index ETFs. Since one can invest in companies like BYD and XPeng through these, why buy the Hang Seng Tech Index at all?
Innovative drugs and the tech definition
Another hot topic recently is innovative drugs. There's a common saying: "H1 shines the light, H2 brings the drugs." So, now ask yourself—does innovative drug development count as a technology sector? Does it require significant investment and high-tech talent? If so, should the Hang Seng Tech Index include innovative drugs? The demand for investing in Hong Kong-listed innovative drug companies is also huge. The GF Fund Hong Kong Stock Connect Innovative Drug ETF (513120) has already attracted nearly 300 billion yuan, and other Hong Kong Stock Connect innovative drug-related ETFs also have substantial scale. These are all efforts to address the Hang Seng Tech Index's problem of being a "hodgepodge" that is neither comprehensive nor specialized. Everyone's understanding of technology is different.
Looking ahead
Finally, one more thing to say. Like me, many investors may feel a mix of "love deep, criticism sharp" toward the Hang Seng Tech Index. Ultimately, we all want it to improve. The fact that the index is now actively seeking opinions and embracing change is a positive sign. Disclaimer: The listed companies or ETFs mentioned in this article are for illustrative purposes only and are not investment advice, nor has any financial institution paid for this content.
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