Hong Kong's stock market launched the Hang Seng Tech index on Monday (June 28) which
tracks the performance of the largest 30 out of 163 tech companies listed in Hong Kong in terms of market capitalisation.
The new Nasdaq-style share index comes amid the “homecoming” of some of China’s technology giants from American exchanges to Hong Kong and Shanghai, as tensions between Washington and Beijing threaten to curtail Chinese companies' access to US capital markets. Last week, Ant Group, the financial-services arm of Alibaba, unveiled a concurrent plan to seek a listing in Hong Kong and Shanghai, skipping the US.
Currently, the top five firms listed on the Hang Seng Tech index are Alibaba, Tencent, Meituan Dianping, Xiaomi and Sunny Optical. Together, they make up more than 40% of the index.
The index universe covers Hong Kong-listed companies that have high business exposure to selected technology themes, including internet, fintech, cloud, e-commerce and digital activities. Investment experts say it will be more convenient for investors who want to buy Chinese tech companies listed in Hong Kong now they have their own index.
Commenting on the launch of the new index, Anita Mo, Deputy Chief Executive Officer of compiler Hang Seng Indexes Company, said: “In view of the rapid blossoming of new businesses in the technology sector and the increasing number of technology companies that are listed in Hong Kong, we developed the Hang Seng TECH Index to meet the fast-growing interest in this investment theme among investors. The Index aims to reflect the performance of sizeable companies in this sector, and to facilitate the development of various index-linked products, including funds and derivatives. We believe that this new index could join the Hang Seng Index and the Hang Seng China Enterprises Index to become one of our flagship indexes.”
The index constituency is reviewed quarterly with a Fast Entry Rule such that sizable newly listed companies with technology themes could be included in the index in a timely manner. The new index is calculated and disseminated in real-time at two-second intervals.
The Hang Seng TECH Index would have achieved significant returns of 36.2% and 35.3% for the full year of 2019 and the first half of 2020 respectively, according to Hang Seng Indexes. As at the end of 2019, investors with about US$34 billion of assets passively track the Hang Seng family of indexes.
The new index could trigger the launch of Exchange-traded funds (ETFs) and other fund products to track these 30 tech stocks, Morgan Stanley said in a report. As of June 2020, Exchange Traded Products (ETPs), which include ETFs and Leveraged and Inverse Products (L&I Products), have globally amassed US$6.3 trillion in assets under management and traded over US$8.8 trillion in value year-to-date.
In 1999 the Hong Kong stock exchange launched the first ETF and since then the city has continued to be a leading ETP market attracting issuers, liquidity providers and investors resulting in the formation of Asia’s ETP hub. HKEX has 134 such products with a combined market cap of HK$311 billion (US$40.13 billion). Their average daily turnover stood at HK$7.1 billion in 2019.