Hang Seng Index Company: The financial industry has been the biggest contributing sector to the performance of the Hang Seng Index this year.

On August 4, Hang Seng Index Company released the report "Hang Seng Index: A Benchmark for Hong Kong's Stock Market that Keeps Pace with the Times." It pointed out that as of June 30, 2026, based on index weight, the top three industries of the Hang Seng Index will be financial services (34%), consumer discretionary (21%), and information technology (17%), which is similar to the current industry structure of the overall Hong Kong stock market. Notably, in the first seven months of 2026, the financial sector will be the largest contributing industry to the Hang Seng Index's performance, while consumer discretionary and information technology will be the two biggest drag factors during that period. The report indicates that since its inception in November 1969, the Hang Seng Index has become the most recognized benchmark for Hong Kong's stock market. To date, the Hang Seng Index is compiled using a market capitalization weighted methodology, which is widely adopted by major global stock market benchmarks. By focusing on large and mid-cap companies while imposing a cap on the weighting of constituent stocks, the Hang Seng Index achieves a balance between market representativeness and investability. The current upward cycle of the Hong Kong stock market began in 2024, when HK stocks started a two-year bull run. Market conditions became volatile in the first half of 2026 but subsequently rebounded. The Hang Seng Index reflects the overall performance of the Hong Kong stock market, recording an 18% increase in 2024 and a further 28% rise in 2025; as for this year (up to July 31), it recorded a 1% increase. During this market cycle, there has been significant variability in individual stock performance. From 2024 to the present, among over 2,000 listed stocks on the main board, half have generated positive returns. Since 2026, the market downturn has become broader, with more than 60% of the main board stocks declining year-to-date. In contrast, the Hang Seng Index has recorded a slight increase during this period. This further solidifies the Hang Seng Index's position as the primary benchmark for the Hong Kong stock market, reflecting the performance of the largest and most liquid stocks in the market. The broader Hong Kong stock market can be represented by the Hang Seng Composite Index, which has a market capitalization coverage of approximately 95%. However, achieving this coverage level requires over 500 constituent stocks; in contrast, the Hang Seng Index currently represents the market with only 93 constituent stocks. The movements of the Hang Seng Index and the Hang Seng Composite Index are fundamentally consistent, with a correlation coefficient exceeding 0.99, indicating that the Hang Seng Index can closely track market conditions with significantly fewer constituent stocks. Generally speaking, increasing the number of constituent stocks can improve market coverage, but the marginal benefits often diminish rapidly. Ranked by market capitalization, the 100 largest companies listed in Hong Kong account for about 70% of the total market value of Hong Kong stocks. Beyond this level, further inclusion of more constituent stocks contributes limitedly to overall coverage but increases the complexity of the index and replication costs. The Hang Seng Index also imposes an 8% weight cap on individual constituent stocks, a common index design that helps diversify risk and limits the concentration and influence of the largest stocks on the index's movements. Furthermore, the market representativeness of the Hang Seng Index has continued to improve. Over the past several years, the market capitalization coverage of the Hang Seng Index has increased from approximately 58% in 2020 to 64% by the end of June this year. The Hang Seng Index Company stated that for nearly 57 years, the Hang Seng Index has been the flagship index of the Hong Kong stock market, reflecting the overall performance of the Hong Kong stock market through different market cycles. Looking forward, as Hong Kong's capital market continues to develop and further strengthens its important role as a "key conduit" connecting the mainland and global markets, the Hang Seng Index will evolve in sync. Through continuous improvement of index compilation methods and regular reviews, the Hang Seng Index will continue to serve as a trusted market benchmark for global investors.