Today, Hang Seng Index Company announced that Kuaishou Technology and New Oriental Education Technology Group will be included in the Hang Seng Index, while New World Development Company will be removed, increasing the number of constituent stocks in the Hang Seng Index from 82 to 83; China Pacific Insurance Co., Ltd. will be included in the Hang Seng H-Share Index, while Longfor Group Holdings Limited will be removed, maintaining the number of constituent stocks in the Hang Seng H-Share Index at 50; Midea Group Co., Ltd. will be included in the Hang Seng Tech Index, while Weibo Corporation will be removed, maintaining the number of constituent stocks in the Hang Seng Tech Index at 40.

The Hang Seng Index Company stated that all changes will be implemented after the market closes on December 6, 2024, and will take effect from December 9, 2024 (Monday).

According to the Hang Seng Index Company's website, it is responsible for compiling and managing the Hang Seng Index series, including the Hang Seng Index, the Hang Seng H-Share Index, the Hang Seng Tech Index, as well as various industry indices related to the Stock Connect, Greater Bay Area, Sustainable Development, etc. As of the end of October 2024, the total asset management value of passive tracking products for the Hang Seng Index series reached 78.5 billion USD, approximately 570 billion RMB.

Latest adjustment of the hang seng index

Today, the Hang Seng Index Company announced the quarterly review results of the Hang Seng Index series as of September 30, 2024, detailing the adjustments of constituent stocks. All changes will be implemented after the market closes on December 6, 2024, and will take effect from December 9, 2024 (Monday).

Specifically, it will be $KUAISHOU-W (01024.HK)$ and $NEW ORIENTAL-S (09901.HK)$ Included in the hang seng index components. $NEW WORLD DEV (00017.HK)$ Removed, the number of constituents will increase from 82 to 83.

Will be $PICC P&C (02328.HK)$ Included in the hang seng h-share index, removed.$LONGFOR GROUP (00960.HK)$The number of constituents remains at 50.

will$Midea Group Co., Ltd (000333.SZ)$Included in the hang seng tech index, removed $WB-SW (09898.HK)$ The number of constituents remains at 30.

In addition,$Hang Seng Hong Kong-Listed Biotech Index (800805.HK)$(Renamed as hang seng hong kong-listed biotech index from December 9, 2024) Component stocks added.$GRAND PHARMA (00512.HK)$、 $QUANTUMPH-P (02228.HK)$ 、$FANGZHOU JIANKE (06086.HK)$, removed.$3D MEDICINES (01244.HK)$、 $CARSGEN-B (02171.HK)$ 、$PHARMARON (03759.HK)$The number of constituent stocks remains at 50.

$Hang Seng Composite Index (800701.HK)$Constituent stocks include midea group co., ltd,$BLACK SESAME (02533.HK)$The number of constituent stocks increased from 517 to 519.

What is the outlook for the Hong Kong stock market?

On September 24, the regulators introduced unexpectedly bullish market policies, leading to significant increases in both A-shares and Hong Kong stocks, with the Hang Seng Index reaching around 23,000 points on October 7, a nearly 30% increase during that period. However, since October 8, the Hong Kong stock market has started to undergo volatile adjustments, and as of the close on November 22, the Hang Seng Index was reported at 19,229.97 points.

Regarding the market trend of Hong Kong stocks, research reports from china international capital corporation suggest that under the baseline scenario, Hong Kong stocks have not fully escaped a volatile pattern. This is because the valuation and risk premium space are limited, and earnings improvement requires greater stimulus. Therefore, stronger expectations at the index level need greater pressure as a premise, which is the condition for larger-scale stimulus under an "emergency" policy mindset. However, the more thorough clearing of Hong Kong stock valuations and positions, coupled with better earnings structures, make it easier for rebounds to occur under suitable catalysts, possibly providing greater resilience compared to A-shares. Thus, "rebound is intermittent, structure is the main line," seems a relatively effective strategy of gradually positioning on the low side while taking moderate profits and shifting focus on the structure during a euphoric phase.

The china international capital corporation pointed out that under the overall baseline assumption of the volatile pattern, "gradually positioning on the low side while taking moderate profits on the euphoric side" and shifting focus to structure seems to be a relatively effective strategy. In terms of industry, it is recommended to pay key attention to three kinds of structures: first, sectors that clear their own supply and policy cycles, where marginal demand improvements would yield better effects, such as internet plus-related consumer services, home appliances, textiles and clothing, and electronics. Second, policy support directions, such as home appliances and autos under the old-for-new policy, as well as the trends in self-owned technology fields like computers and semiconductors. Third, stable returns, such as high dividends from state-owned enterprises.

Research reports from citic sec determine that the Hong Kong stock market could see a reversal in 2025. Firstly, the current valuation advantage of Hong Kong stocks on a global scale is very significant, and the income side issues caused by price pressure in our country will gradually ease. Secondly, nearly 630 billion HKD has flowed into the southbound market over the first ten months of 2024, significantly enhancing overall Chinese capital's relative voice compared to foreign capital, particularly in small and mid-cap sectors. Finally, under the backdrop of a series of domestic policies being gradually implemented, investor expectations are likely to shift. In terms of industry allocation, sectors with pro-cyclical characteristics and large valuation elasticity are expected to benefit in the first half of 2025. As the domestic real estate cycle gradually stabilizes and consumer recovery progresses, related industries' earnings recovery is viewed more favorably.

The china international capital corporation believes that in the medium to long term, attention should be given to new consumption trends that align with the transformation of China's economy and population structure, as well as alpha opportunities arising from expansion abroad, such as mid-range manufacturing (passenger vehicles, construction machinery, batteries, electrical machinery, textile machinery, etc.), media, and new retail. Overall, it is recommended to overweight information technology, internet growth, and some discretionary consumption, while standard weighting energy and finance, and underweighting real estate and some industries.

Citic sec stated that there are two directions worth noting: first, the strong beta property of non-banking financials, especially insurance and the Hong Kong Stock Exchange. Second, the technology and consumer sectors are expected to welcome a sustained valuation recovery trend. As housing prices stabilize and the wealth effect stimulates residents' excess savings, there is a bullish outlook for Hong Kong stocks related to consumer goods as well as technology stocks with strong consumer properties. Among them, the internet sector that reduces costs and improves efficiency while continuously enhancing shareholder returns, the consumer electronics sector benefiting from the replacement policy for old consumer goods, the biotech sector benefiting from overseas monetary easing, and the education and training sector experiencing rapid industry growth are all likely to maintain a continued valuation recovery trend.

Editor/rice