The quarterly review results announced by Hang Seng Indexes Company on August 22nd will be implemented after market close on September 5th and take effect next Monday (September 8th). According to the previous results, CHINA TELECOM (00728), JD LOGISTICS (02618), and POP MART (09992) will be included as Hang Seng Index constituent stocks, increasing the total number of constituent stocks from 85 to 88.
After the quarterly review, newly included index stocks typically attract passive fund inflows, leading to significant increases in trading volume and price volatility for related stocks. The newly included stocks are expected to gain favor from incremental funds during the rebalancing window.
Additionally, POP MART has also been included in the Hang Seng China Enterprises Index, with the number of constituent stocks remaining unchanged at 50. China Foods (00506), Jiangsu Hengrui Pharmaceuticals (01276), and others will be included as Hang Seng Composite Index constituent stocks, while Emperor Watch & Jewellery (00256), CStone Pharmaceuticals (00314), and others will be removed. The number of constituent stocks will increase from 502 to 504.
As an important barometer of Hong Kong's capital market, the Hang Seng Composite Index has historically maintained strict screening criteria for constituent stocks, considering factors including company market capitalization, liquidity, financial performance, and industry representativeness. Index adjustments directly drive the rebalancing behavior of large amounts of passive funds (such as ETFs and index funds) that track related indices, thereby affecting individual stock liquidity and price performance in the short term.
According to Bloomberg data, ETFs tracking the Hang Seng Index, H-shares Index, and Hang Seng Tech Index currently have assets under management of approximately $31.24 billion, $7.03 billion, and $30.88 billion, respectively.
From historical experience, active funds often position ahead of time seeking arbitrage opportunities, so related stocks may have already experienced significant volatility between the announcement and implementation. To minimize tracking error, passive funds typically concentrate their rebalancing activities during the closing session of the trading day before the effective date (September 5th), potentially causing dramatic increases in trading volume and price volatility for related stocks. This impact may be more pronounced for small and mid-cap stocks due to changes in their liquidity and investor structure.
The three newly included stocks—CHINA TELECOM, JD LOGISTICS, and POP MART—are expected to gain favor from incremental funds during the rebalancing window.
From a medium to long-term perspective, the Hong Kong stock market is still widely regarded as a "global value depression," with low valuations providing investors with good safety margins and allocation opportunities. The continuous inflow of southbound funds also confirms mainland capital's recognition of Hong Kong stocks' investment value. This index adjustment may further boost market confidence in related sectors and individual stocks.
Goldman Sachs issued a research report stating that the Hang Seng Index quarterly review announced the addition of CHINA TELECOM, POP MART, and JD LOGISTICS as blue chips. Goldman Sachs estimates that the market capitalizations of the Hang Seng Index, H-shares Index, and Hang Seng Tech Index will rise to $2.09 trillion, $1.42 trillion, and $480 billion respectively, representing increases of 1.6%, 1.1%, and 9% compared to before the changes. The predicted price-to-earnings ratios will rise from 11.3x, 10.7x, and 17.6x to 11.4x, 10.8x, and 18.0x respectively. Earnings per share growth forecasts will be adjusted from 5.4%, 6.3%, and 17.5% to 5.7%, 6.6%, and 16.8% respectively.
Goldman Sachs expects consumer retail, software & services, and automotive stocks to see the most passive fund inflows, ranging from $300 million to $780 million. The firm anticipates Horizon Robotics-W (09660), POP MART, BYD COMPANY (01211), MEITUAN-W (03690), Xiaomi Corporation-W (01810), and Alibaba-W (09988) to record the highest passive net buying, ranging from $185 million to $610 million.
**Related Concept Stocks:**
**CHINA TELECOM (00728)**: As a telecom industry leader, CHINA TELECOM has continued to strengthen its efforts in 5G construction and cloud computing in recent years. Its inclusion reflects the important position that traditional industry leaders still occupy in the index.
**JD LOGISTICS (02618)**: JD LOGISTICS represents the new economy logistics sector, and its selection also reflects the index's focus on high-growth and supply chain core enterprises.
**POP MART (09992)**: As a representative company of trendy toy culture, POP MART has significantly improved its market capitalization and liquidity since listing, becoming an important representative of the new consumption sector in the index.
**BYD COMPANY (01211)**: A global leading new energy vehicle manufacturer with business operations covering passenger cars, commercial vehicles, batteries, semiconductors, mobile phone components and assembly, and other fields. BYD is an exemplar of hard technology and the real economy, driving development through technological innovation and seizing the historical opportunity of green energy and automotive industry transformation.
**MEITUAN-W (03690)**: China's leading life service e-commerce platform with business covering more than 200 categories including food delivery, in-store services, hotels and travel, bike-sharing, instant retail, homestays, and transportation ticketing. It represents the platform economy and digital economy, reshaping the local life service industry through business model innovation and improving social efficiency.