The Hang Seng Indexes Company announced on Wednesday that it has received support from over 80 percent of respondents for six changes in two key areas of the Hang Seng TECH Index methodology — expanding technology theme coverage and introducing a two-stream constituent selection mechanism.
All revisions will be implemented in the index review for the period ended September and will take effect in the index adjustment on December 7.
The company conducted a market consultation in August and has received responses from Hong Kong, mainland China, and other regions, covering asset management companies, traders and market makers, structured product issuers, corporates and industry organizations.
In expanding the coverage of technology themes, the previously proposed revised proposal is adopted to remove the requirement that eligible candidates will no longer fit into the five specific industries under the Hang Seng Industry Classification System.
There will be six revised technology themes, including digital platforms and solutions, artificial intelligence, advanced hardware, robotics and automation, cloud, and frontier technology, while the number of technology sub-themes will be increased from 16 to 24.
Daniel Wong, head of product management of the company, said after the revision, tech companies' market capitalization coverage will rise from 85.3 percent to 91.3 percent, and the median revenue growth rate of constituent stocks will increase from 13.8 percent to 21.3 percent.
In introducing a two-stream constituent selection mechanism, the revised proposal changes the stock selection universe from main board listed companies to constituents of the Hang Seng Composite LargeCap and MidCap Index. Adjustments are made using market capitalization and revenue growth rankings as selection criteria.
Anita Mo, chief executive and head of client management of the company, said the changes reflect the evolving Hong Kong TECH Index — from internet stocks dominating since its 2021 launch to autonomous shares by the first half of 2026 — and the company will address emerging markets by considering sales growth.
Wong said that to maintain the Hang Seng TECH Index AUM of US$37.1 billion (HK$289.4 billion), non-existing constituents must have at least HK$100 million in average daily turnover over the preceding three months, while annual sales must be at least HK$500 million in each of the two most recent consecutive financial years.
The revised proposal also increases the number of constituents from 30 to 50, with the top 40 by market capitalization and the remaining 10 by revenue growth over the past 12 months. Individual stock weighting remains unchanged at 8 percent for individual constituents and 4 percent for foreign companies. The index review results will be announced on November 20.
Regarding market concerns on adding 20 new constituent stocks, Candy Wong, the company's head of product, said the industry generally believes the amount is a reasonable proportion of the overall assets under management, and that there is no need to implement the change in five phases as in past reforms to the Hang Seng China Enterprises Index.
Regarding competition from multinational and mainland index companies, Candy Wong said the company is actively expanding its multi-regional and cross-border index ecosystem, and has already launched composite indices covering markets such as between Hong Kong and the US, and Hong Kong and South Korea.
Candy Wong added that the company will continue to develop diversified index products based on market demand and the needs of "ETF Connect", in order to consolidate Hong Kong's leading position in index compilation as an international financial center.
