Hang Seng Tech Index to shine light on smaller firms that juice fund returns in the shadows of Alibaba, Tencent

Index makes a promising start but fades away on its debut in what is likely to be a hiccup in the big picture
Fund managers may adjust their investment according to the weighting of the new index

Hang Seng Index

Enoch Yiu

Published: 12:10pm, 27 Jul 2020

Why you can trust SCMP

Hong Kong’s new gauge to track the biggest technology companies listed on the city’s stock exchange fizzled out after a strong start on Monday. Despite the wobble, the debut could benefit smaller firms that have juiced returns for investors this year.

The new index declined 1.3 per cent to 6,774.78 points, swinging from as much as 2.2 per cent gain. Meituan Dianping and Xiaomi both slipped 3 per cent while Tencent retreated 1.5 per cent. Overall, 23 members fell today, while six gained and one was unchanged.

While household names such as Alibaba Group Holding and Tencent Holdings have been stealing the limelight in recent months, smaller tech peers have generated market-beating performance of 140 to 225 per cent gains through July 24, according to data compiled by the South China Morning Post.

The new index may give such smaller technology companies the attention from funds that seek to replicate the index’s trajectory, according to stockbrokers. Cloud-based marketing provider Weimob, game developer XD and software provider Kingdee International Software ranked among the best performers this year, while the broader Hang Seng Composite Index slipped 3 per cent.

“The new index will have a positive effect on Hong Kong technology stocks, especially for those included in the index,” said Kenny Ng Lai-yin, securities strategist at Everbright Sun Hung Kai.

Fund managers expect ETFs tracking Hang Seng Tech Index to take off as investors seek a piece of the red hot industry

The tech index comes amid the “homecoming” of some of China’s technology trailblazers from the US markets to Hong Kong and Shanghai, including those of JD.com and NetEase. Ant Group has announced plans for a concurrent listing in Hong Kong and Shanghai. Alibaba, which owns about a third of the operator of Alipay payments system, is also the owner of the Post. Its shares have risen 15.4 per cent this year. They were little changed today.

Investors with about US$34 billion of assets passively track the Hang Seng family of indexes, according to Hang Seng Indexes Company, which is responsible for maintaining the Hang Seng Index and more than 800 of the benchmark’s offshoots.

The newest index of them will track 30 technology companies, from the largest, Alibaba, which advanced 15.4 per cent this year before today to the smallest, online car finance platform Yixin Group, which rose 14.5 per cent.

The index’s top five members, including Tencent, Meituan Dianping, Xiaomi and Sunny Optical, have a combined 41 per cent weight, according to the compiler.

“The new technology index will not only provide a further boost to investor sentiment in the space, but should also encourage the next wave of up-and-coming, innovative new technology companies to choose Hong Kong as an attractive venue for raising capital,” said Oliver Cox, portfolio manager for emerging market and Asia-Pacific equities at JP Morgan Asset Management.

“This is another exciting step forward in Hong Kong’s push to be a primary nexus for technology investment in the Asia-Pacific region.”

Post