New indices would also focus on biotech firms and stocks related to climate change as Hang Seng Indexes aims to become a leader in tracking China markets across different industries.
“China will always be our focus. Hang Seng Indexes would like to become the expert in compiling indices to cover all exchanges in China. When investors want to check the performance of China markets, we want them to first think of checking the indices of Hang Seng Indexes,” said Anita Mo, chief executive of the company, in an interview with the Post.
The plans of the index compiler, a subsidiary of Hang Seng Bank, reflect the fact the city’s capital market is integrating more with mainland China under the bay area development and the various schemes linking the two markets.
CEO of Hang Seng Indexes, Anita Mo. Photo: Edmond So
International investors can put their money into mainland China’s markets via the stock connect schemes. They will soon be able to buy its wealth management products when a similar scheme is launched later this year.
Because of the heightened integration, Mo believes international investors would like more indices measuring Chinese stocks. Investment banks would also benefit, by being able to issue index funds and other derivatives.
As part of achieving these ambitions, Mo said the compiler would produce more indices to cover the bay area, Beijing’s plan to link nine cities in southern Guangdong province to Hong Kong and Macau to form an integrated economic powerhouse.
The company already has some indices covering listed companies based in the zone, but Mo wants to introduce more in the coming years to track a broader range of firms with different themes and in different industries.
She also wants to see more indices that track the performance of companies that conform to environmental, social and governance (ESG) standards.
“Many big fund managers have vowed to add investments in companies that have good ESG practices, and they need benchmark indices to help with their investment decision,” she said.
Hang Seng Indexes will also develop more so-called smart beta indices that take account of factors such as value, quality, yield and volatility rather than purely market capitalisation, she said.
“These smart beta indexes allow investors to carry out different investment strategies other than the traditional market-cap method,” she said.
Mo will also consider thematic indices that track stocks such as biotech start-ups as benchmarks. After Hong Kong Exchanges and Clearing, the local bourse operator, introduced reforms to allow biotech firms without revenue to list, 31 such companies have floated their shares, raising a total of HK$82.1 billion in the three years to the end of March.
“We will be open-minded about exploring different benchmarks that the market might need,” she said.
Mo, the first female CEO of Hang Seng Indexes since it was established in 1984, took the top post in September after Vincent Kwan retired. In March, she carried out the most significant overhaul of the Hang Seng Index since its launch in 1969 by expanding the number of constituent stocks from 55 to 80. The change will take effect in stages until mid-2022, and the number will rise again to 100 at an undefined date.
Mo is no stranger to major reforms. She joined Hang Seng Indexes in 1997 and has since taken several research and management roles. She was a key part of the last major reform which took the number of constituent stocks from 33 to 38 in 2006 by adding H shares. The number expanded to 50 in 2012.
“The expansion of constituent stocks is to [keep up with] with the expansion of a market that has over 2,500 listed companies in Hong Kong, compared with around 60 companies in 1969 when the index was first launched,” she said.