CITIC SEC: The Hang Seng Tech Index is expected to undergo significant revisions, with changes to constituent stocks set to take effect as early as the index adjustment date in December.

CITIC SEC has published a research report stating that the Hang Seng Index Company will release a consultation document on August 10, 2026, seeking market opinions on potential revisions to the Hang Seng Tech Index. The proposed revisions are expected to be announced by the end of September 2026 and implemented in the index review as of September 30, 2026. The Hang Seng Tech Index is anticipated to undergo its most significant revision since its launch in 2020: on one hand, optimizing the coverage of technology themes, and on the other hand, introducing a dual selection mechanism based on market capitalization group and revenue growth group, expanding the number of constituents from 30 to 50. As of the end of June 2026, the assets tracking the Hang Seng Tech Index globally have grown to $40.4 billion, and changes in the sample stock list and weights will trigger a large-scale reallocation of passive funds. The main views of CITIC SEC are as follows: The revision of the Hang Seng Tech Index calculation scheme is primarily driven by structural changes in the Hong Kong technology sector. In the early stages, the Hong Kong technology sector was highly concentrated in internet businesses, but in recent years, there has been a significant increase in the number of listed companies related to advanced hardware and artificial intelligence, with specialized tech companies also entering the market. Meanwhile, companies in the Hong Kong technology sector with strong revenue growth tend to have smaller market capitalizations; those high-growth but relatively smaller companies may not be included in the index under a selection framework based solely on market capitalization. The core significance of this revision to the Hang Seng Tech Index calculation scheme is to make it a broader and more forward-looking benchmark index for Hong Kong technology stocks. The main suggestions for this revision of the compilation scheme are to expand the coverage of technology themes and introduce a grouped selection mechanism. 1) Eliminate the rigid requirements for specific industries designated by the Hang Seng Industry Classification System (HSICS). 2) The six major technology themes will be reorganized into: digital platforms and solutions, artificial intelligence, advanced hardware, Siasun Robot & Automation and automation, cloud computing, and frontier technology. Among them, artificial intelligence will be elevated from a sub-theme to one of the main technology themes; frontier technology will be a new technology theme, including related sub-themes such as aerospace and satellite technology, quantum computing, brain-computer interfaces, new food technology, and advanced materials. 3) The selection range will shift from the main board of Hong Kong stocks to constituents of the Hang Seng Composite Large and Mid-Cap Index. 4) The number of constituents will increase from 30 to 50; a dual selection mechanism based on "market capitalization group" + "revenue growth group" will be introduced: 1. Rank by market capitalization and select the top 40 qualified companies; 2. From the qualified companies not selected by market capitalization criteria, select the top 10 based on revenue growth (calculated from revenue growth over the past twelve months). 5) The turnover rate test of investment indices, innovation screening requirements (R&D expenditure/revenue 5% or year-on-year revenue growth 10% or operating on technology platforms), and other aspects will remain unchanged. The Hang Seng Index Company provides related impacts based on simulation results. Comparing the existing Hang Seng Tech Index with the simulated revised Hang Seng Tech Index, the weight of the top ten constituents drops from 70.6% to 66.3%. Weighting stocks may face pressure from passive fund outflows in the short term, but considering their market capitalization and liquidity levels, the impact is expected to be very limited; the newly added constituents based on market capitalization criteria and revenue growth criteria are expected to account for 9.1% and 2.4% of the revised index, respectively. Thus, the rebalancing phase of the index is expected to bring in HKD 36.5 billion in passive tracking funds, which may have some impact on the liquidity of individual stocks. The expected newly included stocks are likely to further represent the overall landscape of the Hong Kong technology industry. Based on data up to the end of June, predictions for the included stocks indicate that the market capitalization group is expected to add 10 stocks, including Contemporary Amperex Technology and ILUVATAR COREX; the revenue growth group is expected to add 10 stocks, including WERIDE-W and DEEPEXI TECH. The newly included stocks are primarily characterized by advanced hardware and artificial intelligence themes, further representing the current overall landscape of the Hong Kong technology industry. Changes to the constituents will take effect at the earliest in early December. The consultation document from the Hang Seng Index Company will be open for feedback until September 18, 2026; the final revised scheme is expected to be announced by the end of September 2026 and implemented in the index review as of September 30, 2026, with the relevant changes in constituents expected to take effect on the index adjustment date in December 2026. Risk factors: The calculation scheme of the Hang Seng Tech Index may undergo changes; there may be discrepancies between the predictive model data and the actual adjustment data used by the index company; the actual review at the end of the third quarter may contain errors in the inclusion of stocks.