The China Securities Regulatory Commission has approved the listing on Mainland stock exchanges of the first ETFs tracking the Hang Seng TECH Index.
Anita Mo, CEO of Hang Seng Indexes.
The Hang Seng TECH Index reflects the performance of some of the largest and fastest-growing Greater China technology companies listed on the Hong Kong stock exchange.
The index officially launched in July 2020 and has been a hit with investors and product developers. There are currently 13 ETFs referenced to the index, listed on five exchanges globally and collectively housing approximately $3 billion in assets.
Demand in Mainland China is expected to be robust with seven Hang Seng TECH-linked ETFs teed up to list on either the Shanghai or Shenzhen stock exchange.
They are the Bosera Hang Seng TECH ETF, the ChinaAMC Hang Seng TECH ETF, the Dacheng Hang Seng TECH ETF, the E Fund Hang Seng TECH ETF, the Harvest Hang Seng TECH ETF, the HuaAn Hang Seng TECH ETF, and the Huatai-PineBridge CSOP Hang Seng TECH ETF.
Anita Mo, CEO of Hang Seng Indexes, said: “The Hang Seng TECH Index aims to reflect the performance of the most representative Hong Kong-listed leading technology companies. We are delighted that products tracking the Hang Seng TECH Index will soon be launched in the Mainland market. This will give Mainland investors more investment choices and further strengthen the positioning of the Hang Seng TECH Index as one of our flagship indexes.”
Index methodology
The index consists of Greater China-incorporated stocks that specifically have high business exposure to the internet, fintech, cloud computing, e-commerce, and digital technology themes.
Eligible companies must be “technology-enabled” (i.e. operate primarily on the internet or on mobile platforms). Companies that do not fit this definition may also be included if they have revenue growth greater than 10% or an R&D expenses-to-revenue ratio above 5%.
The 30 largest stocks as ranked by market capitalization meeting these criteria are selected to form the index. Constituents are weighted by free-float market capitalization subject to a cap of 8% on any individual stock.
Reflecting the segment’s rapid development, the methodology also contains a ‘Fast Entry Rule’ to facilitate fast-tracked inclusion for suitably qualified potential members.
Stocks from the information technology sector dominate with a weight of 70.2% followed by health care (12.2%), and consumer discretionary (8.3%). Major index positions currently include Alibaba (9.1%), Xiaomi (8.4%), Meituan (7.4%), Tencent (7.2%), Kuaishou (7.2%), Sunny Optical (6.4%), and JD Health (6.4%). Data as of the end of April.