Hang Seng Reshuffle May Leave Out Some Mega-Cap Tech Stocks Again

(Bloomberg) -- Hong Kong’s benchmark index may not get more technology shares in its quarterly review as China’s regulatory clampdowns roil the sector.

JD.com Inc., NetEase Inc. and other mega-cap tech firms that missed out in previous reviews could be left behind again when Hang Seng Indexes Co. unveils a reshuffle of the local bourse on Friday. The stock-market fallout from Beijing’s crackdowns could keep some tech giants from entering the Hang Seng Index, even as its compiler strives to reinvent a gauge that’s filled with financial and property shares.

“The index provider may for now choose to prioritize names from the health care and consumer sectors, given tech’s volatile third quarter,” Bloomberg Intelligence analyst Marvin Chen wrote in a Nov. 18 note. He flagged Great Wall Motor Co., China Resources Beer Holdings Co. and Innovent Biologics Inc. as potential additions.

The Hang Seng Index lags most global peers this year with a 7% decline as China tightens controls over broad swathes of its economy. The Hang Seng Tech Index, which tracks China’s biggest tech companies, has shed 23%, though its has recovered some ground this quarter.

“Non-quantitative factors” could have omitted some large-cap tech names from the past few index adjustments, China International Capital Corp. analysts including Wang Hanfeng wrote in a note. Nongfu Spring Co. and Smoore International Holdings Ltd. are among the possible newcomers, they added.

In March, Hang Seng Indexes announced its biggest-ever overhaul to boost the number of HSI members to 80 from 52 by mid-2022, and add more new economy shares. Since then, the inclusion of stocks such as BYD Co., Xinyi Solar Holdings Ltd. and Li Ning Co. has increased the constituent count to 60.

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