SMIC, Nongfu Spring and Feihe tipped to join Hang Seng Index after review as China’s clout grows in Hong Kong’s equity market
- SMIC, Nongfu Spring, China Feihe, JD Health and Smoore are common names picked by analysts at CICC and China Renaissance
- The five, with a combined market capitalisation of US$165 billion, have had a mixed performance this year while the benchmark index outguns regional peers
Chip maker Semiconductor Manufacturing International Corporation (SMIC), Nongfu Spring, the milk producer China Feihe, JD Health and the vaping device maker Smoore International could make the cut when the list is announced on February 18, according to common picks at China Renaissance Securities and China International Capital Corp.
The five have a combined market value of HK$1.3 trillion (US$165 billion) as of February 15, according to stock exchange data, representing 9.8 per cent of the 64-member index’s current capitalisation. The changes are expected to take effect from March 7.
Inclusion in Hong Kong’s benchmark index boosts capital inflows to the companies, as the gauge is commonly used as the reference by passive investment funds, which allocate their capital based on the weightings on the index. That translates to more investments for the index members, and capital leaving companies that are dropped from the gauge.
“Big-capitalisation stocks from the new-economy sector, such as information technology and health care, will come to be included,” said Bruce Pang, head of research and macro strategy at China Renaissance in Hong Kong. “Furthermore, companies with secondary offerings or dual-class share structures will also have more weighting in the index.”
The Hang Seng Indexes Company added JD.com, NetEase, ENN Energy and China Resources Beer to the index at the previous review in November 2021, raising the constituents to 64 stocks without removing anyone. The compiler aims to expand the key index to 80 stocks by mid-2022, and to 100 over time.
