Hang Seng Overhaul Will Bring Flow of Funds to These Stocks

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Stocks including a vaping technology provider and a short-video platform are expected to see the largest passive inflows when Hong Kong’s benchmark equity gauge begins a dramatic overhaul.

Consumer and health care firms are poised for the biggest improvement to sector representation when the Hang Seng Index expands its membership to 80 stocks by the middle of next year, according to Goldman Sachs Group Inc. and CGS-CIMB Securities International Pte. -- with market cap coverage for both expected to at least double.

Smoore International Holdings Ltd., recent listing Kuaishou Technology and JD Health International Inc. are prime inclusion candidates in the coming quarterly reviews, according to the brokerages.

Being added to the Hang Seng Index brings a boost of capital inflows from passive funds tracking the benchmark. Last year Meituan jumped when Hang Seng Indexes Co. announced its inclusion in November, and the stock is up 20% since being added.

Below are some of Goldman Sachs’ forecasts of potential new additions that could see the biggest amount of buying from passive funds, and the top 5 stocks that could see the most days of passive fund buying -- the estimated period such funds need to buy the shares based on average daily turnover. The longer the period of inflows, the bigger impact on a stock’s share price.

New joiners that may see the largest inflows

Company NameWhy is it likely to be added?

Passive Fund

Inflow ($m)

Potential days

of buying

Kuaishou TechnologyShorter listing time requirement; information technology sector coverage expansion7452.2
Smoore International Holdings Ltd.Shorter listing time requirement; consumer sector coverage expansion1853.9

Top 5 new joiners that may have the most days of buying

Company NameWhy is it likely to be added?

Passive Fund

Inflow ($m)

Potential days

of buying

ENN Energy Holdings Ltd.Industrial sector coverage expansion15716.8
China Gas Holdings Ltd.Industrial sector coverage expansion12316.2
Hansoh Pharmaceutical Group Co.Health care sector coverage expansion7813
Longfor Group Holdings Ltd.Properties & construction sector coverage expansion13910.1
Li Ning Co.Consumer sector coverage expansion1648.5

Source: Goldman Sachs Group Inc.

©2021 Bloomberg L.P.

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