Hong Kong’s equity benchmark could add more consumer and health-care stocks in its next revamp, as the index compiler makes a push to reach the 80-member goal.
(Bloomberg) — Hong Kong’s equity benchmark could add more consumer and health-care stocks in its next revamp, as the index compiler makes a push to reach the 80-member goal.
Drug store operator JD Health International Inc. and restaurant chain operator Yum China Holdings Inc. are among potential candidates for inclusion when Hang Seng Indexes Co. announces the results of its quarterly review on Friday. Analysts are expecting a net addition of three to four stocks to the 76-member Hang Seng Index.
“Currently, the consumer and health-care industries are underrepresented in the Hang Seng Index, so stocks in these two industries have a greater chance of being included,” CMB International Capital Corp. strategist Daniel So wrote in a recent note.
Meanwhile, large-cap stocks including short-video platform Kuaishou Technology and automaker Li Auto Inc. may miss out on inclusion this time due to profitability concerns. “Past experience shows that unprofitable shares are basically not included,” So wrote.
“Consensus expectations for negative earnings-per-share in both 2022 and 2023” could hold Kuaishou back from inclusion, Bloomberg Intelligence analysts including Marvin Chen wrote in a note. Potential additions include JD Health and Shandong Weigao Group Medical Polymer Co., he added.
Hang Seng Indexes initially planned to increase HSI constituents to 80 by mid-2022, but hasn’t set a new timeline after missing that goal. It eventually aims to reach 100 members.
In November, the index compiler named three additions to the benchmark, including Haier Smart Home Co., Tingyi (Cayman Islands) Holdings Corp. and China Resources Mixc Lifestyle Services Ltd.
The Hang Seng Index entered a technical correction on Thursday after falling more than 10% from a Jan. 27 peak, as growing geopolitical concerns and doubts over China’s economic recovery spurred profit taking. The downshift followed a rally since November.
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