The Hang Seng Indexes Company appears poised to refine the Hang Seng Tech Index, a move likely prompted by the market's persistent downturn. This year, the Hang Seng Tech Index has faced significant pressure, being one of the hardest-hit major indices in the Hong Kong market. It experienced a cumulative decline of over 15% at one point, and although it has rebounded recently, the recovery has been weak. A key criticism from investors is the index's lack of pure technology focus, as its top weighted constituents include Meituan, Alibaba, and JD.com, leading some to jestingly call it the "Takeout Index." This has raised questions about potential flaws in the index's compilation methodology.
Perhaps in response to investor feedback, the Hang Seng Indexes Company recently decided to optimize the Hang Seng Tech Index. The specific refinement involves a detailed breakdown of the six broad themes covered by the index, with numerous sub-themes being added. The original six themes were quite general: Internet, FinTech, Cloud, E-commerce, Digital, and Intelligent Technology. After optimization, the Internet theme now includes sub-themes such as "Online Business" and Wireless/Mobile Applications. The FinTech theme adds Electronic Payment/Transactions, Financial Technology, and Blockchain. The Cloud theme expands to include Cloud Computing/Application Development/Solutions, Big Data, and Data Center Operations. The E-commerce theme incorporates an Online Sales sub-theme. The Digital theme now covers Digital Electronics and Semiconductors. Finally, the Intelligent Technology theme adds Robotics, Autonomous Driving, Artificial Intelligence, Internet of Things, and Smart Living.
Clearly, the purpose of this refinement is to break down each theme into specific business directions, reducing ambiguity about the index's compilation method and enhancing its transparency. The core objective is to make the assessment of constituent stocks' technology attributes clearer and more operational. Essentially, this is a technical refinement rather than a major rule change as some might assume.
What impact will this upcoming optimization have on the market? In the short term, the effect is likely minimal, as it will not lead to a large-scale reshuffling of existing constituents. However, the long-term impact is positive. By providing clearer and more specific business direction criteria for potential new entrants, the refinement will reduce uncertainty during index reviews and improve market consensus.
Finally, the Hang Seng Tech Index's quarterly review date is March 31. The next constituent adjustment will be announced in mid-May and implemented in early June. Preliminary estimates suggest two companies might be removed from the index: Kingdee International and Kingsoft Cloud. Both have seen significant adjustments and currently have market capitalizations of just over HKD 30 billion, while the estimated market cap threshold for this review is approximately HKD 44.5 billion. Conversely, high-performing stocks like Minimax and Zhipu are expected to be added to the Hang Seng Tech Index.
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