Editorial | Hang Seng Index struggles to stay both local and relevant
- Expansion of Hong Kong’s stock market aims to make it more representative with mainland companies in the majority, but it does little to encourage the city’s innovation and entrepreneurship
The Hang Seng Index is ready for its first major shake-up in half a century. It’s overdue.
The benchmark with its current 50-plus constituent stocks needs to be more representative of the overall market activities on the exchange. This is the aim of the overhaul, first pushed by the exchange and the Securities and Futures Commission in 2018.
The plan is to raise to 80 the number of constituent stocks by the middle of next year and eventually to track 100. Since 2018, the listing of 43 companies has added HK$11 trillion in capitalisation to the world’s third-largest stock market, accounting for 40 per cent of all capital raised during this period.
These were mostly companies based in technology or the internet. It’s high time the index, which has been heavy on financials, expands to reflect this changing trend.
The overhaul includes a proposed cap on the weighting of stocks at 8 per cent, from the current limit of 10 per cent. Only two stocks, insurer AIA and mainland social media giant Tencent, currently have a weighting of 10 per cent. They will face a cut.