(Bloomberg) -- Hang Seng Indexes Co. will boost the members of its Hong Kong stock benchmark to 80 and cap the weighting of any one company as it implements the biggest changes to the gauge’s 51-year-old history, in a bid to embrace the new economy.The wide-ranging overhauls to the Hang Seng Index include increasing the number of constituents from 52 and limit a stock’s weighting to 8%, the firm said in a statement on Monday. The revamp also shortens the listing history requirement for a company to be included into the gauge. Implementation of the changes will begin as early as its May index review and go through mid-2022.The HSI, which in 2020 lagged global peers by the most in decades, has been moving away from being filled with financial and property stocks in recent years at a time when China’s tech giants hold growing sway. In 2019, the information technology sector overtook financials as the index’s largest industry by market value, according to a December consultation paper detailing proposed changes to the benchmark.The new weighting limit of 8%, down from a maximum of 10%, will apply to all members and will also be applied to the Hang Seng China Enterprises Index, effective from the index rebalancing in June. The benchmark currently caps secondary listings or shares with unequal voting rights at 5%.“This is expected to help reduce the volatility of the HSI,” said Jingyi Pan, a market strategist at IG Asia in Singapore. “Immediately, those above 8% in terms of weighting - Tencent, AIA, HSBC - comes to mind with selling pressure expected under the changes.”The announcement follows a record buying frenzy from mainland traders that sent the stock gauge past the 30,000 point level in January for the first time since May 2019, led by heavyweights like Tencent Holdings Ltd. and Hong Kong Exchanges & Clearing Ltd.READ: Alibaba Among Stocks to Benefit From HSI Reform: Street WrapThe Asian financial hub has become a preferred venue the past several years for a wave of Chinese megacaps to sell shares. Kuaishou Technology, backed by Tencent, surged 161% on its debut last month in the world’s biggest internet initial public offering since Uber Technologies Inc. The HSI revamp will also shorten the listing history requirement to three months for new companies effective May.In addition, Hang Seng Indexes will ensure 20 to 25 of constituents in the benchmark are classified as Hong Kong firms, a number that will be evaluated every two years. The proportion of mainland companies in the index by market value was 79% in 2020, it said in December’s paper.On Friday, the company said it would add Alibaba Health Information Technology Ltd., Haidilao International Holding Ltd. and Longfor Group Holdings Ltd., expanding the benchmark to 55 members from 52 effective March 15.(Changes first two paragraphs, adds quote. A previous version of this story corrected month of Kuaishou’s debut in second last paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Investors will soon discover if Hong Kong’s Hang Seng Index will undertake one of the biggest overhauls in its 51-year history, a move that would impact tens of billions of dollars in funds tracking the stock benchmark.On Monday, Hang Seng Indexes Co. will offer its conclusion after an industry consultation over proposed changes to the city’s stock benchmark, which if approved would increase the number of member constituents, cap weightings of individual companies and fast-track new listings. The announcement is expected shortly before a press briefing that starts at 4:30 p.m. local time.The city’s stock market is already undergoing change at a time when China’s tech giants hold growing sway, forcing the index compiler to act on a staid gauge overstuffed with banks and insurers. Hong Kong has become the preferred venue for a wave of Chinese megacaps to sell shares, including standouts like Kuaishou Technology, which surged 161% at its debut in early February after holding the world’s largest internet initial public offering since Uber Technologies Inc.The announcement will also come on the heels of a record buying frenzy from mainland traders that propelled the HSI past the 30,000 point level in January for the first time since May 2019, led by heavyweights like Tencent Holdings Ltd. and Hong Kong Exchanges & Clearing Ltd. If the wide-ranging changes are approved, analysts say that the HSI, which in 2020 lagged global peers by the most in decades, could have more room to run.READ: Alibaba Among Stocks to Benefit From HSI Reform: Street Wrap“The valuation of the index will be pushed higher as more new economy stocks are expected to join under the changes,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “This could also make the index more volatile.”As part of the proposed changes, Hang Seng Indexes is looking at ensuring that a certain number of benchmark members are classified as Hong Kong firms, which could dilute the influence of some of the largest stocks. The portion of mainland companies in the index by market value was 79% in 2020, according to the December consultation paper.On Friday, Hang Seng Indexes added three companies to its index following its quarterly review, expanding the constituent count to 55 members from 52. The changes are effective March 15. The benchmark index was 1.3% higher as of 10:36 a.m. Monday in Hong Kong, with Meituan and Tencent Holdings Ltd. among leading gainers.Launched in 1969, the Hang Seng Index started out with 33 constituents, rising to 38 in 2007 when it began to include H-share firms. Last year, Hang Seng Indexes added dual class shares and secondary listings to its index in a major revamp, allowing Chinese giants like Alibaba Group Holding Ltd. into the city’s benchmark.(Updates with market moves)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Asia-Pacific stock indexes were pressured as risk assets lost their sheen after global bond yields firmed on expectations of economic expansion.