About 16,700% Return in
50 Years Makes Hang Seng Index the World’s Best
A mirror to Hong Kong’s
fortunes since its 1969 launch, the Hang Seng Index has also become a
reflection of China’s economic rise.
The benchmark stock
gauge marks 50 years since its official debut on November 24, 2019.
Commencing as the city
recovered from Communist riots two years earlier, it has served as a yardstick
for Hong Kong’s rise and its rebounds from various crises a trait being tested
a new as pro-democracy protests convulse the territory.
It’s up by around
16,700% since 1969, according to data compiled by Bloomberg (the index was back
dated to July 1964 on its release).
In that time its
constituents have evolved from local firms to an embrace of mainland Chinese
names that now account for more than half of its market value.
“The Hang Seng Index has
become a proxy of China’s economy,” said Jackson Wong, asset management
director at Amber Hill Capital.
“It’s no longer a pure
reflection of Hong Kong.”
In August 1992, what’s
now known as CITIC became the first Chinese company to join the gauge.
Today the majority of
companies on the index get their revenue from mainland China.
The gauge’s correlation
with the Shanghai Composite Index has been hovering near a record high,
according to data compiled by Bloomberg.
Between 2001 and 2019,
two Hang Seng heavyweights Tencent Holdings and China Mobile were the biggest
contributors to gains.
The index will need to
continue adapting, said Arthur Kwong, Head, Asia Pacific Equities,BNP Paribas
Asset Management.
A wider embrace of
Chinese mid-cap stocks is needed to stave off competition from rivals such as
MSCI and FTSE Russell, he said.
“I’m still bullish on
China’s large-caps, but this segment is more mature,” said Kwong.
“I’m more positive on
China mid-caps, the opportunities for growth are there. If the Hang Seng Index
can be more flexible, it will do well.”
Hang Seng Indexes says
it is planning a consultation in the first quarter to review the presence of
financial stocks, which currently account for about half the weight on the
gauge.
That compares with an
average of 19% of its peers in Europe, US, Japan and mainland China, according
to Bloomberg Intelligence.
It will also discuss
including firms that have shares with different voting rights, held by
technology companies like Alibaba Group Holding — one of the reasons Hong Kong
lost out to New York in 2014 for the company’s initial public offering.
Alibaba’s $11billion
Hong Kong debut could provide a “shake up of the Hang Seng Index,” if it
becomes a member, said Bloomberg Intelligence analyst Steven Lam.
AIA Group and HSBC
Holdings would likely to see their weightings reduced in the event, he said.
Hong Kong’s gauge has reflected the city’s growing pains, with crashes during
the world oil crisis in the 1970s, the early-1980s impasse between China and
Britain during handover talks and financial crises in 1997 and 2008.
Now, the city’s markets
are under pressure from protests that have plunged the local economy in
recession and an ever-changing whirl of trade war sentiment.
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