The Hang Seng Technology Index will undergo significant revisions.

On Monday, the Hang Seng Index Company published a consultation document mentioning two significant revisionsexpansion of thematic coverage and the introduction of a group stock selection mechanism. After the revisions, the index constituents will increase from 30 to 50 stocks, and the sub-themes under the six major technology themes will rise from 16 to 24, with the addition of a "Revenue Growth Group" as a supplementary mechanism for market capitalization stock selection. Simulation estimates show that the top ten weightings of the revised index will decrease from 70.6% to 66.3%. The number of constituents under the advanced hardware and artificial intelligence themes will grow from 5 and 3 to 15 and 6, respectively, significantly enhancing the index's coverage and growth attributes. The anticipated revisions to the Hang Seng Tech Index are expected to be announced by the end of September 2026 and implemented in the index review as of September 30, 2026; however, this still requires the final decision of the index advisory committee after considering consultation opinions. Any corresponding changes to the index constituents will take effect with the index adjustment in December 2026. Background of the revision: Structural evolution of the Hong Kong tech ecosystem Technology sector landscape: from a dual-core internet model to multiple drivers Since its launch in 2020, the core positioning of the Hang Seng Tech Index has always been to provide a representative and investable benchmark index for the Hong Kong technology sector. However, the landscape of the Hong Kong tech sector has undergone profound changes over the past five years. In 2021, the Hong Kong tech sector was highly concentrated in two major themes"Internet" and "E-commerce," which essentially constituted the core map of internet businesses. By 2026, this landscape has broadened significantly: the number of listed companies engaged in advanced hardware and providing artificial intelligence-related solutions has continued to increase, and the importance of the "digital" and "intelligent" themes has risen substantially. Simultaneously, specialized tech companies have been successively listed in Hong Kong, further enriching the pool of technology investment targets. Faced with the continuous expansion of the investment scope in the tech sector, the existing industry's limitations and thematic frameworks are increasingly unable to adequately reflect the market's overall picture. Stock selection pain point: structural mismatch between high growth and large market capitalization There exists a structural contradiction within the Hong Kong tech sector: companies with strong revenue growth tend to have smaller market capitalizations. Data shows that the median revenue growth of the current Hang Seng Tech Index constituents is significantly below that of non-index constituents with smaller market capitalizations. This means that within a framework where market capitalization is the sole stock selection standard, some technology companies with high growth potential but relatively small sizes are systematically excluded from the index. For a benchmark index aiming to represent the entirety of the Hong Kong tech sector, this omission constitutes a clear representation gap. Core revision proposal: dual-track approach of thematic expansion and group stock selection Expanding thematic coverage: removing industry restrictions, restructuring six major tech lines The current rules under industry requirements classify candidate companies into one of five industries designated by the Hang Seng Industry Classification System (HSICS)Industrial, Consumer Discretionary, Healthcare, Financials, and Information Technology. The Hang Seng Index Company proposes to completely remove the industry requirements, primarily based on the rationale that technological innovation has deeply permeated various industries, and traditional industry classification boundaries can no longer accurately define technology attributes. Key changes explained: Artificial intelligence has been upgraded from a sub-theme to an independent primary theme alongside "Cloud." Digital platforms and solutions will integrate the three major sectors of internet, e-commerce, and fintech. Advanced technology represents a newly established theme covering cutting-edge domains such as aerospace satellites, quantum computing, and brain-computer interfaces. Introducing a group stock selection mechanism: a "dual-track" inclusion framework based on market capitalization and revenue growth Stock selection scope narrowed to large and medium-sized stocks. The Hang Seng Index Company suggests limiting the stock selection scope to constituents of the Hang Seng Composite Large & Mid Cap Index. This adjustment aims to ensure that the index maintains sufficient investability. Data shows that the asset management scale tracking the Hang Seng Tech Index has grown from $1.5 billion at its initial launch in 2020 to $40.4 billion as of June 2026this rapid expansion in scale necessitates that the index balances expansion with maintaining liquidity and investability. Dual group stock selection: 40 by market cap + 10 by revenue growth The Hang Seng Index Company proposes adopting a dual-group stock selection mechanism and increasing the number of constituents from 30 to 50: Other candidate qualification requirements (unchanged): Liquidity requirements: using turnover rate tests as for investment indices. Innovation screening requirements: R&D/revenue 5%, or annual revenue growth 10%, or operating using tech platforms. Weight limits: 8% for non-foreign company stocks, 4% for foreign company stocks, and 10% for the total of foreign companies. Weighted method: free-float adjusted market capitalization weighting. Review cycle: quarterly review, quarterly adjustment. The core value of this mechanism is to open an independent channel for high-growth, small-scale technology companies while preserving the market-cap-dominated framework, ensuring they are no longer systematically excluded due to market cap thresholds. Simulation estimates: index characteristics and images of new constituents Changes in index concentration and scale characteristics Based on simulated results as of June 30, 2026, the revised index maintains exposure to large tech companies while diluting its concentration: The weight of the top ten has decreased by 4.3 percentage points, and the average and median market capitalizations have both declined, reflecting that the new constituents are relatively smaller in scale, but the maximum market capitalization constituents remain unchanged, maintaining the leadership of large tech companies. Images of new constituents: market cap group vs revenue growth group The 20 newly added constituents (10 from the market cap group + 10 from the revenue growth group) present markedly different profiles: The market cap groups new constituents account for 9.1% of the index, with a median market cap of HKD 54.1 billion, typical of mid-sized tech companies. The revenue growth groups new constituents only account for 2.4% of the index, but the median revenue growth rate is as high as 82.0%, with a median market cap of only HKD 29.1 billion, exhibiting typical characteristics of "small size, high growth." Liquidity comparison: The average daily trading volume median of new constituents in the revenue growth group (HKD 291.8 million) is lower than that of the market cap group (HKD 650.8 million), yet remains within a reasonably investable range. Distribution of technology themes: hardware and AI proportions rise significantly According to the proposed technology theme structure, the revised index will exhibit a more balanced thematic distribution among the 50 constituents: The number of constituents in the advanced hardware theme will grow significantly from 5 to 15, and artificial intelligence will increase from 3 to 6, with the combined share of these two hard tech themes rising from 26.7% to 42%. This change effectively responds to the structural transformation of the Hong Kong tech sector from "soft" to "hard." This article is reproduced from "Cailian Press," edited by GMTEight: Feng Qiuyi.