Hong Kong tech index to harness fast-growth companies in bid for better performance

To improve the performance of its technology-focused benchmark, Hong Kong's stock index compiler will introduce 10 new fast-growing companies with annual sales of at least HK$500 million into the Hang Seng Tech Index. This move aims to capitalize on artificial intelligence-driven gains that the index has missed out on. The threshold is part of a broader set of reforms to revitalize the index, which has fallen 23% year-to-date.

The current benchmark, often considered Hong Kong's counterpart to the Nasdaq, is heavily weighted towards Chinese tech giants such as Tencent and Meituan, who have yet to generate significant investor interest amidst the AI frenzy. In contrast, global competitors like the Nasdaq 100 and the Korea Composite Stock Price Index have hit record highs this year.

Anita Mo, CEO of the compiler, explained that the tech index should be forward-looking by incorporating emerging firms based on sales growth. In December, the index will expand to 50 members, with half of the new additions being the fastest-growing companies with sales of HK$500 million or more in two consecutive financial years, regardless of market capitalization.

The remaining 10 additions will be selected based on market capitalization, provided they maintain a minimum average daily turnover of HK$100 million over the past three months.

The two selection criteria aim to address concerns about the liquidity of smaller companies potentially hindering accurate fund tracking. In June, the index replaced Kingdee International Software and Kingsoft with MiniMax and Z.ai, both involved in Chinese AI developments, to capture market enthusiasm. However, the new members' share prices peaked in March and June, respectively, preventing the index from capturing most of their gains.

Despite retaining its quarterly review mechanism, the maximum weight of any single constituent will be reduced from 10% to 8%. Additionally, the index will expand sub-themes to 24 from 16, as proposed in a consultation held in August. The revised list of index constituents will be released on November 20 and will commence on December 7.

Mo emphasized the company's goal to grow alongside the Hong Kong market and strengthen its role as "superconnector."