CICC Research has released a report stating that on August 10, the Hang Seng Indexes Company published a consultation paper on proposed revisions to the Hang Seng Tech Index compilation methodology. The core proposals include broadening the index's technology theme scope, adjusting the constituent stock selection mechanism, and increasing the number of constituents. CICC believes that if implemented based on the current consultation paper, this would represent the most profound and systematic change to the Hang Seng Tech Index since its launch in 2020. It would not only better align with global technology development trends but also maintain the index's representation of the Hong Kong stock market's tech sector, especially amid the ongoing wave of A-to-H listings.
Scope of Revisions: Expansion to 50 Constituents, Industry Theme Restructuring, and Revenue Growth Stock Selection
CICC considers these proposed changes to be the most significant reform since the index's launch. This is because it goes beyond simply increasing the index's coverage in terms of numbers. It also reconstructs the technology theme classification to better reflect the latest market developments and introduces a revenue growth-based selection mechanism to include tech companies with high growth potential. The process updates and optimizes the stock selection process comprehensively. Specifically, the index expansion increases the number of constituent stocks from 30 to 50, making it more diversified and balanced. The most direct change in this revision is the increase in the number of constituents from 30 to 50, directly expanding the index's coverage. According to the simulation in the consultation paper, the additional 20 slots will primarily be allocated to "emerging" themes such as advanced hardware, robotics, and artificial intelligence. The number of previously dominant internet leaders remains unchanged, but the weight of the top ten constituents in the new index would drop from 70.6% to 66.3%. This reduction in concentration also implies a decrease in the volatility and drag caused by some large-capitalization leading companies. It is important to note that the consultation results and summary from March 2021 regarding optimizing the Hang Seng Index also included a proposal to increase the number of constituents. However, unlike the previous document, which specified a target of increasing the number of stocks to 80 by mid-2022 and eventually fixing it at 100, this consultation paper for the Hang Seng Tech Index does not set a target timeline for the expansion. Therefore, it is possible that the number of constituents will be directly increased from 30 to 50 when the index adjustment takes effect in December of this year.
Theme Restructuring: Candidate Companies Must Be Highly Related to Six Specified Tech Themes
The Hang Seng Tech Index has long been criticized for its excessive exposure to consumer sectors and its relatively small exposure to hard technology, which has been a reason for its underperformance this year. To address this, the consultation paper proposes replacing the current industry classification, which is based on the Hang Seng Industry Classification System (HSICS) and includes sectors like internet, e-commerce, digital, fintech, and cloud. Instead, the new index would be built around six themes and 16 sub-themes that are more closely aligned with global tech trends. These themes are: 1) Digital Platforms & Solutions (Internet, Software & Services, Digital Finance), 2) Artificial Intelligence (Infrastructure, Applications & Platforms), 3) Advanced Hardware (Semiconductors, Smart Devices, New Energy Storage), 4) Robotics & Automation (Robotics, Autonomous Driving), 5) Cloud (Big Data, Data Centers), and 6) Frontier Technology (Aerospace, Quantum Computing, Brain-Computer Interfaces, New Food Technology, Advanced Materials).
Introduction of a Grouped Stock Selection Mechanism: Adding Revenue Growth as a Criterion
The current requirements for the stock pool (Hang Seng Composite Index large and mid-cap stocks), liquidity (monthly turnover rate of 0.1%), and innovation screening (R&D/Revenue ≥ 5% or Revenue Growth ≥ 10% or Tech Platform Operations) remain unchanged. However, a novel design is introduced: out of the 50 constituents, the top 40 will be selected by market capitalization ranking from the eligible companies. The remaining 10 slots will be filled based on revenue growth over the past 12 months. This change gives companies that are not large in market cap but have extremely rapid growth an opportunity to be included in the Hang Seng Tech Index. It represents a shift from focusing solely on "big and beautiful" companies to also valuing "tech growth potential."
Potential Inclusions: Hard Tech Dominates in Market Cap and Growth Groups
Based on the stock pool of Hang Seng Composite Index large and mid-cap stocks as of June 30, 2026, as well as market cap, liquidity, 2025 revenue growth, and potential industry classification from the consultation paper, CICC estimates that the following stocks may meet the conditions for inclusion. The adjusted theme distribution would be 15 stocks in advanced manufacturing, 14 in digital platforms and solutions, 12 in robotics and automation, 6 in artificial intelligence, and 3 in cloud. Among these, 10 would be included based on market cap ranking, and 10 based on revenue growth ranking. It is important to note that the description of the revenue growth calculation in the consultation paper is somewhat vague, and adjustments have been made to align with the industry numbers simulated by the Hang Seng Indexes Company. Furthermore, the projections in this report are based on data as of June 30. The formal adjustment will use data as of September 30, which could lead to discrepancies. For example, recently listed and highly watched A-to-H tech leaders may also meet the inclusion criteria by then. CICC will update its projections at that time.
Potential Impact: Optimizing Index Structure and Enhancing Tech Representation
In the short term, fund inflows into newly included stocks could have a positive impact. Based on CICC's projected potential inclusions and the weights and market capitalizations of current constituents, CICC has calculated the potential weights of the 50 stocks in the new Hang Seng Tech Index. The specific impact on trading and portfolio rebalancing will depend on each stock's average daily trading volume. According to the consultation paper, the assets under management tracking the Hang Seng Index are $40.4 billion. Combined with the average daily trading volume of each stock over the past three months, CICC's detailed calculations are in the full report. It is important to note that these weight calculations are based on data as of June 30. Many newly listed stocks will enter the screening pool, and many stocks will face lock-up expirations in the second half of the year. Therefore, the free-float market capitalization of each stock will change significantly by the end of September. The potential impact calculations at the individual stock level are only for reference based on this simulation and are not the final impact of the year-end adjustment. In the long term, this revision will help enhance the Hang Seng Tech Index's representation of the technology sector and its attractiveness. As a flagship index for the Hong Kong stock market's tech sector, the Hang Seng Tech Index has underperformed this year, falling 13.4% year-to-date. Despite being a "tech index," this performance pales in comparison to the rallies driven by the AI technology wave in other markets, such as the KOSPI (+56.1%), the Nikkei 225 (+34.1%), and the A-share STAR 50 (+23.4%). A key reason for Hong Kong's weakness this year is the structural mismatch in the market. Currently, the Hang Seng Tech Index has a combined weight of over 70% in domestic-demand-focused sectors like internet platforms, e-commerce, new energy vehicles, and consumer electronics. The index's earnings are also highly correlated with the domestic consumption cycle. The recent wave of A-to-H listings has actually been attracting more and more A-share "hard tech" leaders to Hong Kong, improving the overall landscape of the Hong Kong stock market. The proposed revision to the Hang Seng Tech Index compilation methodology is expected to integrate perfectly with this trend. It not only expands coverage at the constituent level but also updates and restructures theme classifications to better reflect the latest market developments. The novel introduction of a revenue growth-based selection mechanism is particularly noteworthy. These optimizations are expected to work together, shifting the Hang Seng Tech Index from its previous focus on "big and beautiful" to a more inclusive approach. Many fast-growing companies with smaller market capitalizations will now have a chance to be included, making the index more representative of the market and aligning with global technology trends.
Adjustment Timeline: Final Plan to Be Announced in Late September, Effective at the December Index Adjustment
The consultation paper states that the final decision on the proposed revisions to the Hang Seng Tech Index is expected to be announced in late September and implemented during the index review with a cut-off date of September 30. Any related constituent changes will take effect in December 2026 (after the close of the first Friday of the month, i.e., December 4). Following past practices, the announcement of the adjustment results is expected in early November. CICC will update its forecast report based on the latest information and data at that time.
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