CICC: Hang Seng Index adjusts and expands Hong Kong Stock Index adjustments are in line with expectations

The Zhitong Finance App learned that after the market on Friday (August 22), the Hang Seng Index Company announced its regular semi-annual index adjustment results. The Hang Seng Index included China Telecom (00728), JD Logistics (02618), and Bubble Mart (09992); Hang Seng state-owned enterprises were included in Bubble Mart; Hang Seng Technology was not adjusted. The bank is expected to bring in capital inflows of about 160 million, 68.74 million, and 450 million US dollars from China Telecom, JD Logistics, and Bubble Mart. The inflow times are about 4.4 days, 3.5 days, and 1.0 days, respectively. In line with the additional requirements included in the Hong Kong Stock Connect, the current Hong Kong Stock Exchange is expected to include 20 and remove 19, which is almost in line with the bank's previous predictions. The above adjustments will be implemented on September 5 and officially take effect on September 8.

CICC's main views are as follows:

Hang Seng series index adjustments: Hang Seng Index included in China Telecom, JD Logistics and Bubble Mart; Hang Seng state-owned enterprises included in Bubble Mart; Hang Seng Technology was not adjusted

Constituent stocks: China Telecom, JD Logistics and Bubble Mart are included in the Hang Seng Index; Bubble Mart is included in Hang Seng state-owned enterprises.

1) Hang Seng Index: In this adjustment, Bubble Mart, China Telecom and JD Logistics included 1.44%, 0.51%, and 0.22%, respectively. After the adjustment, the number of constituent stocks increased to 88. In an earlier report, the bank successfully predicted the inclusion of Bubble Mart and JD Logistics (“Hong Kong Stock Connect and Hang Seng Index Adjustment Preview (2025-8)”).

2) Hang Seng State-owned Enterprises: This adjustment included Bubble Mart, with an inclusion weight of 2.10%. After the adjustment, the number of constituent shares remained unchanged at 50.

3) Hang Seng Technology: None were excluded this time, and the 30 constituent stocks remained unchanged.

Capital flow: Focus on the positive impact on China Telecom, JD Logistics, Horizon Robotics, etc. Based on institutional summaries, the capital size of ETFs tracking the Hang Seng Index is about US$31.24 billion, and the ETFs tracking the state-owned enterprises and Hang Seng Technology Index are about US$7.03 billion and US$30.88 billion respectively. Combining the above components and changes in equity weight, and combined with the 3-month average daily turnover, the bank estimates the possible impact of changes in passive capital:

1) Hang Seng Index: The most time required for passive capital inflows is China Telecom, JD Logistics, and Bubble Mart, which were included this time. The bank is expected to bring in capital inflows of about 160 million, 68.74 million, and 450 million US dollars, with inflows of about 4.4 days, 3.5 days, and 1.0 days, respectively. Among the capital outflows, due to changes in index weight, the Bank of China's potential passive capital outflow may reach 120 million US dollars. The outflow period is about 0.6 days.

2) Hang Seng State-owned Enterprises: The most time required for passive capital inflows was Bubble Mart, which was included this time. The bank is expected to bring in US$150 million in inflows, and the inflow time is about 0.3 days.

3) Hang Seng Technology: Due to changes brought about by the 8% reset of the individual share weight limit, the most time required for passive capital inflows were Horizon Robot-W and BYD shares. The bank is expected to bring in about 560 million and 500 million US dollars in inflows, with inflows of 3.4 and 0.9 days, respectively.

Hong Kong Stock Exchange Rate adjustments: 20 units are eligible for inclusion

This time coincides with the Hang Seng Composite Index semi-annual index review (adjusted twice a year, ending at the end of June and December, respectively). Changes in the composition of the Hang Seng Composite Index are also the main basis for the Hong Kong Stock Connect adjustment. In line with the additional requirements included in the Hong Kong Stock Connect, the current Hong Kong Stock Exchange is expected to include 20 and remove 19, which is almost in line with the bank's forecast in the “Hong Kong Stock Connect and Hang Seng Index Adjustment Preview (2025-8)” (19 included, 18 excluded). Specifically,

20 are likely to be included in Hong Kong Stock Connect: China Food, Cao Cao Chuxing, Yun Zhisheng, Yingen Bio-B, Nanshan Aluminum International, Conet Optics, Huiju Technology, Blue Moon Group, Yaojie Ankang-B, Zhengli Xinneng, Zhou Liufu, Country Garden, Happy Meet Group, MIRXES-B, IFBH, Boleyton, Jinjing Xinneng, Baize Pharmaceuticals, Aunt Shanghai and Aurora B.

Furthermore, Ningde Times, Hengrui Pharmaceuticals, Sanhua Intelligent Control, and Haitian Flavors, which are also included in the Hang Seng Composite Index in this round, are listed companies in AH and have all entered the Hong Kong Stock Connect early after the end of the price stabilization period 30 days after their respective listings. In addition, Tianyue Advanced (2631.HK), which was recently listed as a company listed in AH, will also enter Hong Kong Stock Connect trading after the 30-day price stabilization period ends, that is, in mid-late September.

Adjustment schedule: implemented on September 5, officially effective on September 8

The above index adjustment results will officially take effect on September 8 (Monday). The Hong Kong Stock Connect official inclusion list will also be announced on the Shanghai Stock Exchange website on September 5, and officially entered into Hong Kong Stock Connect trading on September 8.

Active capital will use early purchase or sale arbitrage operations, but in order to minimize tracking errors, passive capital will still adjust positions at the end of the day (that is, September 5). As a result, related stocks will show “abnormal volume” far greater than usual. Some small to medium market capitalization companies believe that the bank will also benefit more clearly from increased liquidity and expanded investor base.