Hong Kong benchmark to expand to 100 as part of historic overhaul that reflects city’s changing role as financial hub

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The benchmark currently has 55 constituents, following the addition of three stocks after a regular quarterly review last week

Expansion viewed as improving Hang Seng Index’s overall coverage and achieving better representation for each industry

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The benchmark Hang Seng Index currently has 55 constituents, following the addition of three stocks after a quarterly review last week. Photo: Nora Tam

Enoch Yiu

Published: 5:04pm, 1 Mar 2021Updated: 12:42pm, 2 Mar 2021

Hang Seng Indexes, which compiles Hong Kong’s benchmark index, said on Monday that the number of constituent stocks of the Hang Seng Index will rise to 80 by mid 2022, before ultimately rising to 100.

The overhaul, the biggest in the index’s 52-year history, reflects the changes in Hong Kong’s role as a financial centre. The reforms follow the conclusion of a consultation period in January, which showed strong support for an increase in the number of constituent stocks, as this will improve the benchmark Hang Seng Index’s overall coverage and achieve a more reasonable representation for each industry.

The expansion is intended to ensure that the index, the benchmark of the world’s third-largest stock market, truly reflects the drastic changes in the local market, which has seen a wave of listings by big technology and pre-revenue biotechnology companies following a reform by bourse operator Hong Kong Exchanges and Clearing in April 2018. In its current guise, the Hang Seng Index continues to be dominated by financial companies and is viewed as outdated.

The stocks to be included as part of the latest reforms will only been known when the quarterly review takes place in May. The benchmark currently has 55 constituents, following the addition of three stocks after a quarterly review last week. It did not remove any stocks. It added three stocks in a review in November as well, and removed one.

“Over the next year, Hang Seng Indexes is likely to add more stocks from among new economy companies, health care firms and US-listed mainland Chinese technology giants that have a secondary listing in Hong Kong,” said Tom Chan Pak-lam, the chairman of industry body Institute of Securities Dealers.

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Following the increase in its constituent stocks to 80, the Hang Seng Index will cover 71 per cent of the total market capitalisation of Hong Kong, up from 56.6 per cent as of the end of January. It will also cover 66 per cent of market turnover, up from 50 per cent now, Hang Seng Indexes said on Monday.