PetroChina, Shenhua join Hang Seng Index
China Overseas Land and H-share giants get blue-chip status
PetroChina, China Shenhua Energy and China Overseas Land & Investment will join the Hang Seng Index following the latest quarterly review, bringing the number of index constituents to 43.
Index compiler HSI Services said yesterday the changes would take effect on December 10.
PetroChina, the country's largest oil producer, and Shenhua, the biggest coal firm, had been expected to join the seven other H-share companies already on the blue-chip index.
Property developer China Overseas Land was chosen over mainland industry leaders Aluminum Corp of China (Chalco) and China Cosco Holdings, more widely tipped given their high market value and daily trading turnover over the past 24 months.
The weighting of PetroChina will be 5.84 per cent, the third-heaviest on the index after China Mobile and HSBC Holdings. Shenhua has a 2.39 per cent weighting and China Overseas Land 1.07 per cent.
The move gives the firms a higher profile and expose their shares to buying by funds and other investors tracking the index, although the impact on the share price is not expected to be significant or long-lasting.
'The inclusion of Shenhua, PetroChina and China Overseas Land will not have a big positive impact on the three stocks,' said Ben Kwong Man-bun, the chief operating officer at KGI Securities.
Index funds closely tracking the key index would spend 'only one day' to complete the switch given the strong daily turnover, said a strategist at a pension fund. 'Acquisitions of the three stocks would be worth about HK$4 billion.'
No companies were removed in the latest index review as HSI Services is gradually increasing the number of constituents to 50.
Market participants expect the remaining seven slots to be set aside exclusively for H-share firms.
'I am not surprised at the inclusion of Shenhua and PetroChina, as they have completed their A-share offerings ahead of the review,' said Wong Chi-man, an analyst at China Everbright Securities.
'I think Chalco and China Cosco will be included in the next review, as their adjusted market values are larger than those of other candidates.'
Mainland brokerage ICEA listed six potential candidates that could join the index by the end of next year.
'We tip six mainland firms, namely Country Garden, China Communications Construction, Nine Dragons Paper, China Coal, China Merchants Bank and China Telecom,' the brokerage said. 'All they have to do is to wait until the minimum listing historic requirement is fulfilled as well as the A-share flotation.'
The growing importance of mainland firms has prompted HSI Services to add more H-share companies to the index after selecting China Construction Bank Corp as the first mainland-incorporated firm in September last year.
'The Hang Seng Index is now just like a China stock index, as about 60 per cent of its composites are mainland-linked companies,' said Francis Lun Sheung-nim, the general manager of Fulbright Securities. 'After becoming a composite of the index, PetroChina can reverse its recent weak trend.'
PetroChina's A shares more than doubled on their debut on Monday, while its H shares have dropped 11.8 per cent since the A-share offering.
Mr Lun said Jiangxi Copper and Chalco were qualified for the Hang Seng Index but their share price fluctuations were too big.
'I expect more and more mainland companies will be included in the index,' he said.
'H-share firms that are planning to list in the A-share market will be the next targets to be included in the index.'