Financial Associated Press, November 21. Last Friday, Hang Seng Index announced the index adjustment results for the third quarter. Among them$LI AUTO-W (02015.HK)$with$WUXI APPTEC (02359.HK)$It was included in the Hang Seng Index, while Hang Seng State-owned Enterprises and Hang Seng Technology were not included and excluded.

In response, CICC pointed out that based on Bloomberg's summary, the ETF capital scale that tracks the Hang Seng Index is about 24.77 billion US dollars, tracking state-owned enterprises and$Hang Seng TECH Index (800700.HK)$The size of ETFs is approximately US$5.63 billion and US$15.37 billion, respectively. Combining these components and changes in equity weights, they measure the potential flow of passive capital.

Hang Seng Index: The ideal car - W, which takes the most time for passive capital inflows, and Pharmaceutical Kangde are expected to take 4.0 days and 2.3 days, respectively. On the contrary, because$HSBC HOLDINGS (00005.HK)$The upper weight limit of more than 8% has been reset (current weight 8.37%), which is expected to bring about 0.8 days of passive capital outflow. At the same time,$POWER ASSETS (00006.HK)$,$MTR CORPORATION (00066.HK)$versus$WHARF REIC (01997.HK)$Due to the weight reduction, the passive capital outflow will also take about 0.5 days.

Hang Seng State-owned Enterprises: Due to the increase in weight,$MEITUAN-W (03690.HK)$It is expected to bring in an inflow of 68.1 million US dollars, and the inflow time is about 0.2 days. Funds are flowing out,$HAIDILAO (06862.HK)$Due to the reduced weight, it is expected to result in a passive capital outflow of 4.5 million US dollars, which is expected to take about 0.15 days.

Hang Seng Technology: Due to the increase in weight, what is the most time required for passive capital inflows$WB-SW (09898.HK)$,$NIO-SW (09866.HK)$with$JD-SW (09618.HK)$It is estimated that it will take about 4.4 days, 1.9 days, and 1.4 days, respectively. Also, since$XIAOMI-W (01810.HK)$Exceeding the upper weight limit of 8% has been reset (current weight 11.14%), which is expected to result in a passive capital outflow of about US$480 million, and the required outflow time is about 3.0 days.

Adjustment of the Hong Kong stock market: Expecting Keep and$TUHU-W (09690.HK)$Meet the conditions for inclusion in Shanghai-Hong Kong Stock Connect

Since this is a quarterly index adjustment, it is systematically adjusted once every six months$Hang Seng Composite Index (800701.HK)$As far as this is concerned, only stocks that are eligible for the rapid inclusion mechanism will be considered for inclusion. Based on the current Hang Seng Composite Index adjustments and the Hong Kong Stock Connect inclusion requirements, CICC expects Keep and Tourover-W to meet the scope of inclusion in Hong Kong Stock Connect.

Characteristics of the adjusted index: the Hang Seng Index continues to expand; the Hang Seng Index's major consumption and healthcare coverage has increased

Index expansion: After this adjustment, the number of constituent stocks of the Hang Seng Index increased from 80 to 82. According to the consultation results issued by Hang Seng Index in March 2021, the constituent stocks of the Hang Seng Index will increase to 80 shares by mid-2022, and will eventually be fixed at 100 shares. Currently, they are still expanding towards this goal.

Industry representation: Major consumer and healthcare market coverage has increased. Referring to the Hang Seng Index Company's industry classification (that is, 7 industry categories), the coverage of non-essential and essential consumption and the healthcare industry increased from 47.8% and 34.2% to 52.6% and 36.2%, respectively, after the Hang Seng Index adjustment.

Industry share: The share of optional consumption has increased significantly. After this adjustment, the Hang Seng Index's share of the market value of the new economy reached 50.2%, an increase of more than 1.8ppt (1/1000) compared to the current 48.4%, mainly benefiting from an increase of 2.1ppt in the optional consumer sector.

Adjustment schedule: Officially effective December 4

The above index adjustment results will officially take effect on December 4 (Monday). During this period, it is still not ruled out that some active funds will adopt certain arbitrage operations based on the results of the adjustments announced, but in order to minimize tracking errors, passive funds will choose to adjust their positions on the trading day before entry into force (that is, December 1). At that time, CICC expects that the relevant stock transactions may be far greater than usual “abnormal volume”, especially at the end of the session.

Editor/Corrine