Hong Kong is poised to overhaul its Hang Seng Tech empire, increasing its stake to 50 companies and making AI and robotics key themes.
Hong Kong is preparing to restructure the Hang Seng Tech Index, increasing the number of companies to 50 and allowing promising technology stocks to be included in the index sooner. Six new themes are highlighted: AI, robotics, cloud, and future technologies.
On August 11, 2569, at 10.35:XNUMX a.m., Bloomberg News reported that Hong Kong is preparing for a major restructuring of the Hang Seng Tech Index, the market's leading technology stock index, increasing the number of companies included in the index from 30 to 50. The index will place greater emphasis on companies in the artificial intelligence (AI), robotics, semiconductor, and future technology industries, in order to provide a more comprehensive reflection of China's technological progress.
Hang Seng Indexes Co., the index compiler, revealed in a consultation document that under the new structure, the number of companies included in Hang Seng Tech will increase to 50. Of these, 10 companies will be selected based primarily on revenue growth, rather than market capitalization.
This approach would allow smaller, high-growth tech companies to be included in the index more quickly, without having to wait until they have a large market capitalization—an issue investors have long demanded, especially after Hang Seng Tech was criticized for being too slow in including promising Chinese tech companies in its index.
Currently, there are approximately $40,000 billion in passive investments referencing the Hang Seng Tech Index, meaning changes in the index's composition could affect investment trends in Chinese and Hong Kong technology stocks.
An example reflecting this problem is Z.AI, an AI model developer recently added to the Hang Seng Tech index in June, after its share price soared more than 1,000% since its IPO in January. Meanwhile, the Hang Seng Tech index has fallen approximately 12% since the beginning of the year and lags behind both Chinese and US technology stock indices.
Charu Chanana, Chief Investment Strategist at Saxo Markets This adjustment is seen as an opportunity for emerging technology companies, particularly in the AI, semiconductor, and emerging economy industries, to be included in the index from the early stages of their growth, instead of having to wait until they become very large.
In addition to increasing the number of companies, the Hang Seng Indexes are preparing to overhaul their technology sector classification framework, defining six new main themes:
- Digital Platforms
- Artificial intelligence (AI)
- Advanced Hardware
- Robotics
- Cloud Computing
- Frontier Technology
Meanwhile, the sub-themes will increase from 16 to 24 groups, adding new technologies such as Quantum Computing and Aerospace.
Currently, Hang Seng Tech holds shares in 30 companies, weighted according to their free-float market capitalization, with a cap of 8% for each stock.
A restructuring simulation shows that the combined weight of the top 10 stocks in the index will decrease from 70.6% to 66.1%, which will help reduce the concentration of the index in large technology stocks and distribute the weight more evenly to other companies.
The Hang Seng Indexes are accepting feedback from stakeholders until September 18th and aim to announce the final details of the revisions by the end of September, before implementing the new criteria for index rebalancing in December 2569.
refer : bloomberg.com
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