Hang Seng Indexes has unveiled a new equity index providing exposure to Chinese companies that are poised to benefit from the increased adoption of e-commerce.

The index offers exposure to Chinese companies across the e-commerce value chain.

The Hang Seng Shanghai-Shenzhen-Hong Kong E-Commerce Index targets firms across the online retail value chain and includes Hong Kong-listed stocks as well as Chinese A-shares that are available through the Stock Connect program.

Eligible securities must have an average daily trading volume of 20 million Hong Kong dollars or Chinese renminbi.

The methodology screens for companies that derive at least 40% of their revenue from a range of e-commerce-related industries as defined by FactSet.

This includes mega-cap e-commerce tech firms, individual online retail outlets selling anything from pet supplies to pharmaceuticals, internet warehouse operators, express couriers, electronic payment platforms, CRM software providers, and digital marketing specialists.

The index selects the 30 largest stocks from the eligible universe. Constituents are weighted by float-adjusted market capitalization subject to an individual cap of 10%. Rebalancing occurs quarterly with buffer rules helping to limit unnecessary turnover.

The index is notably concentrated in the top ten constituents, which account for over three-quarters (76%) of the index. The largest five stocks each trigger the 10% cap – namely Alibaba Health, SF Holding, Alibaba Group, Tencent, and JD.com.

Similar to their developed market counterparts, Chinese e-commerce companies have thrived in 2020 as the Covid-19 pandemic accelerated consumer habits online – using back-tested performance, the index is up 44.9% year-to-date (27 October).