Currently, the Hang Seng Index in Hong Kong includes 82 stocks, with the ultimate goal of expanding the number of constituent stocks to 100. Analysis suggests that the medical care industry is still the least represented industry in the Hang Seng Index, while consumer staples, discretionary items, real estate, and construction may receive higher weights in the review in the fourth quarter of this year.
Pop Mart and Kuaishou may be added to the Hang Seng Index!
In the first three quarterly reviews this year, the Hong Kong Hang Seng Index only changed one constituent stock without expanding. In the last quarterly review of this year, analysts believe that live streaming industry leader Kuaishou Technology, biotechnology company Koji Medicine, and toy manufacturer Pop Mart are expected to be added to the Hang Seng Index.
Currently, the Hong Kong Hang Seng Index includes 82 stocks. In 2021, the Hang Seng Index company stated that the ultimate goal is to expand the number of constituent stocks to 100, hoping that the Hang Seng Index can more equitably represent the seven major industries of the Hong Kong stock market.
However, although increasing constituent stocks helps improve the index's diversification, if the characteristics of the newly added stocks do not meet investors' expectations for the index, it may also disappoint investors.
Brian Freitas, founder of Periscope Analytics, stated: "Since no index constituent stocks have been added this year, adjustments may be made in December."
However, since the Hang Seng Index company has not clearly indicated which year it will achieve the goal of expanding the index to 100 stocks, some analysts believe that the pace of adjustments may be slow. Periscope analyst Freitas stated: "The process of increasing the number of constituent stocks to 100 may be delayed until 2026."
Analysts believe that the medical care industry is still the least represented in the Hang Seng Index. Quiddity analyst Janaghan Jeyakumar stated:
"Keeptop Healthcare and Chinares Pharma may be included because regulatory institutions in the medical industry have introduced some plans to support innovative drug manufacturers."
Consumer staples, discretionary consumer goods, real estate, and construction may gain higher weight in the hang seng index. IG Markets analyst Hebe Chen stated:
"Especially for discretionary consumer goods, this industry, after a long period of stagnation, finally welcomed a rebirth at the end of September."
MIB Securities Hong Kong Limited analyst Sonija Li has identified Pop Mart as a potential candidate stock, along with Kuaishou and Xiaopeng Autos. Due to the strong enthusiasm of Chinese consumers for 'trendy play', this year, Pop Mart's stock listed in Hong Kong has risen by over 300%.
