The Shenzhen Stock Exchange (SZSE) has dramatically raised the number of constituent stocks in the benchmark SZSE Component Index to 500 from 40 in a move widely considered to be complementary to the expected launch of the Shenzhen-Hong Kong Stock Connect scheme later this year.
The adjustment increased the weighting of tech enterprises in the index from 14 percent to 20 percent, while that of the financial and real-estate sectors is reduced to 14 percent from 31 percent.
Francis Kwok Sze-chi, marketing director at Bright Smart Securities (HK) Ltd, told China Daily the adjustment will better represent the listed companies in Shenzhen. This, he said, will offer more investment opportunities for Hong Kong and overseas investors.
He said Shenzhen's benchmarket index now includes more tech firms which would certainly provide a better indication to Hong Kong and mainland investors who are showing increased interest in high-tech companies' shares.
"Many funds in Hong Kong and elsewhere will arrange their portfolios of mainland shares in accordance with the weighting of each sector in the benchmark index," Kwok said.
He also noted that since the SZSE Component Index now contains many more firms than it used to, it will be much harder to manipulate the index in the future, which is good news for both domestic and overseas investors.
According to the SZSE, the combined market capitalization of all 500 constituent stocks currently amounts to about 13 trillion yuan ($2.1 trillion) - nearly 60 percent of the total.
Dickie Wong, executive director of research at Kingston Securities Co, said many mainland, SAR and overseas investors are interested in high-tech companies with strong growth potential.
The launch of the second stocks cross-trading link between the mainland and Hong Kong could trigger a rush for such stocks, he said.
Yuan Ji, chief research officer of Guangzheng Hang Seng Research Co Ltd, said the component adjustment of the SZSE Component Index showed that the Shenzhen bourse wants to ensure that the development of the stock market will reflect the growth of emerging industries.
"It also shows that the Shenzhen Stock Exchange wants to see that emerging industries will be supported by the capital market," he added.
Index publisher MSCI (Morgan Stanley Capital International) Inc is due to make a decision on whether to include Shanghai-listed A shares in its Emerging Markets Index in June.
The SZSE Component Index jumped 3.5 percent at the close of trading on Thursday.
sophiehe@chinadailyhk.com
(HK Edition 05/22/2015 page7)
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