Hong Kong-based index provider Hang Seng Indexes has launched a new Chinese equity index that targets firms where the Chinese government is the largest shareholder.
The index provides exposure to Hong Kong-listed companies where the largest shareholder is the Chinese government.
The Hang Seng China State-holding Enterprises Index consists of companies that are listed in Hong Kong excluding real estate investment trusts (REITs).
Eligible constituents are ranked using a multi-factor approach based on financial quality (return-on-equity; cash-flow-to-debt), dividend yield, and price volatility.
The 150 securities with the largest composite factor scores are selected for inclusion and weighted by free-float market capitalization subject to a 10% cap per stock.
As of 2 August 2019, the largest constituents are China Construction Bank (3.7%), China Mobile (2.9%), Industrial & Commercial Bank of China (2.8%), Bank of China (2.3%), and China National Offshore Oil Corporation (2.2%).
According to Hang Seng, the index may be used as the underlying reference for new investment products including ETFs.
Currency-hedged indices
In addition, Hang Seng has introduced two new indices as part of its currency-hedged series: the HSI EUR Daily Hedged Index and HSCEI EUR Daily Hedged Index.
The indices reference the Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI), respectively, while incorporating a daily hedge between the Hong Kong dollar and the euro.
The HSI is the leading barometer for the health of the Hong Kong stock market. It consists of the 50 largest companies listed on the Hong Kong stock exchange.
The HSCEI is also formed of 50 Chinese large-cap companies listed on the Hong Kong stock exchange. It differs in the types of shares included within its composition – index securities are split between 40 H-shares and a total of 10 Red-chips and P-chips.
With the addition of these two indices, the Hang Seng currency-hedged series now consists of 12 indices.
Hang Seng has launched a number of new indices so far in 2019. In July, the firm introduced the Hang Seng China A Innovative Enterprises Index which covers large-cap China A-share companies with a focus on innovative businesses and emerging industries. And earlier in May, it unveiled its first ESG equity ETFs which are also based on the HSI and HSCEI indices.