Hang Seng launches China ‘New Economy’ and Stock Connect indices

Sep 3rd, 2018 | By | Category: ETF and Index News

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Hang Seng Indexes has unveiled two new indices tracking different segments of the Chinese equity market.

Hang Seng launches China new economy and stock connect indices

Hang Seng has unveiled two new indices tracking different segments of the Chinese equity market.

China’s new economy

The Hang Seng China New Economy Index reflects the performance of Chinese companies that operate in ‘New Economy’ industries and are listed in Hong Kong, mainland China or the United States.

The index consists of the 100 largest companies by total market capitalization, subject to certain liquidity constraints. Constituents are weighted by free float market capitalization with a cap of 10% on individual securities.

The index is denominated in renminbi and conducts a bi-annual reconstitution and rebalancing.

Both Tencent Holding and Alibaba have reached the applicable 10% cap on security weight with the next largest constituents being Baidu, China Mobile, and JD.com with weights of 6.9%, 6.3% and 3.1% respectively.

According to Hang Seng Indexes, the index was created to meet the demand for an index that tracks the performance of New Economy companies in China’s onshore and offshore markets. The firm notes the index is suitable as the base for various investment instruments, including ETFs, with its broad coverage allowing for an integrated China equity universe.

Vincent Kwan, Director & General Manager of Hang Seng Indexes, commented, “The New Economy concept is of rising interest among investors. Our first response was the launch of the Hang Seng SCHK New Economy Index in January this year. With a focus on Chinese enterprises, the Hang Seng China New Economy Index will provide the market with a comprehensive reference that reflects the performance of the top-tier Chinese companies in New Economy industries across three key locations.”

Stock Connect

The index provider’s other new launch is the Hang Seng Stock Connect Sector Top Index which tracks the performance of companies across different sectors that are eligible for trading via the Stock Connect schemes.

The programme allows Hong Kong-based investors to trade stocks listed on either the Shanghai or Shenzhen stock exchanges (northbound transactions) and similarly grants mainland Chinese investors access to Hong Kong-listed shares through trading on the Shanghai or Shenzhen stock exchanges (southbound transactions).

The index references the performance of sector leaders that are listed in Hong Kong and/or the Mainland. The top two companies in each of 31 industry sectors – as measured by calculating combined rankings based on market value, net profit and revenue – are included as constituents. For companies with dual listings of A-Shares and H-Shares, the index adopts a ‘smart’ strategy that will select the lower-priced share class as the constituent and perform switching between share classes based on any change in relative prices.

Constituents are weighted by market capitalization subject to a 10% cap. Switching is conducted on a monthly basis with reconstitution and rebalancing occurring annually. The index is also denominated in renminbi.

The largest constituents are Ping An Insurance (10.9%), Tencent Holdings (9.9%), China Construction Bank (9.6%), Industrial and Commercial Bank of China (6.7%), and China Mobile (5.4%).

“We have designed the Hang Seng Stock Connect Sector Top Index to serve as a reference benchmark for investors who are interested in cross-market investment with a focus on sector leaders,” added Kwan.

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