Hang Seng Indexes has launched the Hang Seng Stock Connect Big Bay Area Composite Index, a new China equity index reflecting the performance of Chinese companies operating in the Guangdong-Hong Kong-Macao Big Bay Area (Big Bay Area).
The index provides exposure to Chinese companies Chinese companies operating in the Guangdong-Hong Kong-Macao Big Bay Area.
The Big Bay Area encompasses nine cities and two Special Administrative Regions (SARs), namely Hong Kong, Macao, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Zhaoqing, Huizhou and Jiangmen.
Daniel Wong, Director & Head of Research and Analytics at Hang Seng Indexes, commented, “The Guangdong-Hong Kong-Macao Big Bay Area is an economically important region that is attracting growing international interest and recognition, alongside New York Metropolitan Area, San Francisco Bay Area and Tokyo Metropolitan Area. The nine cities and two SARs in the Big Bay Area each have their own particular economic characteristics. More development and cooperation in the Area may result in greater prosperity.”
The index universe includes Hong Kong-listed stocks and Mainland-listed A-Shares that derived at least 50% of their revenue from the Big Bay Area in the latest complete fiscal year. Stocks must also be participating in Northbound or Southbound trading under the Stock Connect scheme to be eligible for index inclusion.
The index consists of the 250 largest stocks fulfilling the above criteria and is free float-adjusted market-capitalization-weighted with a 10% cap on individual securities.
The largest type of constituents are A-Shares with an index weight of 46.5%, followed by ordinary Hong Kong shares with 26.2%. H-Shares make up 8.5% of the index while “Other HK-listed Mainland Shares” account for 14.5%.
Financials make up the largest sector exposure with a weight of 32.9%, consisting of just 20 securities. The next largest sector exposures are properties & construction (21.4%; 55 constituents), consumer goods (13.7%; 46 constituents), information technology (13.3%; 29 constituents), and consumer services (7.1%; 24 constituents).
From a geographic perspective, 99 of the 250 constituent companies have Shenzhen as their main base of operations. At around 48%, Shenzhen has the heaviest weighting in the index. Hong Kong and Guangzhou follow, with weightings of 26% (64 constituents) and 8% (43 constituents) respectively.
Wong added, “The Big Bay Area is a theme that is of increasing interest to investors in Hong Kong and the Mainland. The launch of Hang Seng Stock Connect Big Bay Area Composite Index is responding to this new market development. We will continue to observe Big Bay Area development and plan, with the aim of identifying the potential for launching a variety of thematic indexes that use the Hang Seng Stock Connect Big Bay Area Composite Index as the universe for constituent selection. The launch of a series of Big Bay Area indexes will facilitate the market to develop index-linked products, and further integrate the real economy and financial development. This will help drive the economic progress of the Big Bay Area.”