Is this good news for CHL?
Tuesday December 16, 7:07 am Eastern Time
HK to shuffle Hang Seng Index, launch 100-index
HONG KONG, Dec 16 (Reuters) - Hong Kong's stock indices will be revamped next year to take into account the rising
weight of China-related plays in the territory's market, Hang Seng Index compiler HSI Services Ltd said on Tuesday.
HSI Services said it would replace two Hong Kong-based stocks in the blue chip Hang Seng Index with Shanghai Industrial
Holdings Ltd (0363.HK) and China Telecom (Hong Kong) Ltd (NYSE:CHL - news; 0941.HK) effective January 27.
The company also said it would launch a new Hang Seng 100 Index in April to provide investors with a broader-based stock
market index than the 33-component blue chip Hang Seng Index.
''The local stock market has reached a state where it needs a series of indices to meet the different needs of investors,'' HSI
Services chairman Anthony Wong said in a statement.
Wong denied HSI was changing the blue chip index and the launch of a broader based index in order to make manipulation of
the Hang Seng Index more difficult.
''Because the Hang Seng Index is made up of very large market capitalisation and actively traded stocks and it has a very wide
investor base, we do not think the Hang Seng Index can be manipulated,'' Wong said.
''That is what we are saying. We are not saying there is or there isn't (manipulation).
Due to the heavy weighting of HSBC Holdings, which accounted for about 25 percent of the Hang Seng, the index appeared
open to manipulation by derivatives traders.
The Hang Seng Index will remain the benchmark for measuring the performance of the Hong Kong stock market, while the
newly-introduced Hang Seng 100 Index will provide investors with an alternative broader-based stock market indicator.
Interest in China-related stocks increased this year, while the turnover coverage of the Hang Seng Index has weakened to fall
to a historic low of 24 percent in August compared with the usual 60 percent, prompting some criticism from investors.
''In light of the structural changes to the local stock market with more listings of H shares and China-affiliated corporations,
HSI Services Limited has decided to revise one of the selection criteria for the constituent stocks,'' it said.
To include the two new constituent stocks into the Hang Seng Index, HSI Services said constituent stocks would no longer be
required to have a substantial business presence in Hong Kong.
Hang Seng Index constituents normally need a listing history of 24 months, but Shanghai Industrial listed in May 1996 while
China Telecom only listed in October this year.
''Although constituent stocks should normally have a listing history of 24 months, this should not preclude companies meeting
all other selection criteria, but with a shorter listing period from being selected as a HSI constituent stock,'' Wong said.
Shanghai Industrial and China Telecom will replace Shun Tak Holdings Ltd (OTC BB:SHTGY - news; 0242.HK) and South
China Morning Post (Holdings) Ltd (OTC BB:SCHPY - news; 0583.HK) from January 27.
With the changes, the market capitalisation coverage of the Hang Seng Index would have increased to 71.1 percent as at
November 28 from 65.9 percent and the turnover coverage to 57 percent for the month of November from 47.7 percent. |
