Response Proposed Changes to the Hang Seng TECH Index (“HSTECH”) Public Consultation
Release Date: 2026-09-04
| Product Department | By email |
| Hang Seng Indexes Company Limited | research@hsi.com.hk |
| 19/F Hang Seng Bank Headquarters | |
| 83 Des Voeux Road Central, Hong Kong |
4th September 2026
To: Hang Seng Indexes Company Limited
Re: Proposed Changes to the Hang Seng TECH Index (“HSTECH”) Public Consultation
We thank Hang Seng Indexes Company for conducting this market consultation on the proposed changes to the Hang Seng TECH Index. As a representative organisation of Hong Kong’s financial services industry, the Hong Kong Securities & Futures Professionals Association places great importance on how index methodologies affect market efficiency, product development, and investor interests. Following internal discussions and feedback collected from our members, we hereby submit our responses to the consultation questions.
Overall, our Association supports the proposed directions, including expanding theme coverage, introducing a two‑stream selection mechanism, and increasing the number of constituents. We believe these changes will enhance the breadth and forward‑looking nature of the Hang Seng TECH Index as a benchmark for Hong Kong technology stocks. At the same time, we offer specific recommendations to refine classification standards, disclosure practices, transitional arrangements, and ongoing monitoring, with a view to further strengthening the index’s investability and market confidence.
Question 1: Proposed Changes 1 – Expand Theme Coverage
Q1A. Removal of Sector Requirements Do you agree with the proposal to remove the Sector Requirements from HSTECH eligibility, such that eligibility is determined primarily by theme/sub-theme alignment?
Reply: Agree.
As a financial market participant, our association supports the proposal to remove the current sector requirements for the Hang Seng TECH Index and instead determine candidate eligibility based on technology themes and sub‑themes. Technological innovation has now deeply permeated various sectors such as finance, consumer, industrials, healthcare, and energy; traditional industry classifications may not fully capture a company’s core technological capabilities or its business transformation. Therefore, using business substance and technology‑oriented attributes as the primary criteria would better enhance the index’s coverage and representativeness of the evolving structure of Hong Kong’s technology sector.
However, removing sector requirements also increases the importance of classification judgments. We suggest that the Index Company establish a consistent and verifiable assessment framework, which could consider factors such as the proportion of technology‑related revenue or assets, R&D expenditure, core technologies and products, degree of commercialisation, and the tangible contribution of technology businesses to the group’s earnings. For diversified companies, it is advisable to set a materiality threshold for technology businesses, so as to avoid companies being classified as technology enterprises based solely on minor investments, collaboration plans, or market narratives.
We also recommend that the Index Company, after each review, appropriately disclose the theme classification and the main basis for adding or removing constituents, so that market participants can better understand the evolution of the index’s scope, and to enhance the transparency and predictability of the methodology.
Q1B. Refinement of the six Tech Themes
Do you agree with the proposal to refine the six Tech Themes as i) Digital Platforms & Solutions, ii) Artificial Intelligence, iii) Advanced Hardware, iv) Robotics & Automation, v) Cloud and vi) Frontier Technology?
Reply: Agree.
Our association endorses the proposal to refine the six Tech Themes into (i) Digital Platforms & Solutions, (ii) Artificial Intelligence, (iii) Advanced Hardware, (iv) Robotics & Automation, (v) Cloud, and (vi) Frontier Technology. The new categorisation more closely aligns with the current development trajectory of the technology industry chain and better reflects the recent expansion of the Hong Kong market in areas such as AI applications, semiconductors and hardware, smart manufacturing, cloud services, and the listing of specialist technology companies.
From an index investment perspective, updating the theme structure helps the market more clearly identify the investment scope covered by the Hang Seng TECH Index and reduces the previous over‑concentration on internet platforms and e‑commerce companies. In particular, elevating Artificial Intelligence to a standalone theme is consistent with its market positioning as a cross‑sector foundational technology and a key growth driver. The addition of Frontier Technology also provides reasonable room for emerging technologies with future commercialisation potential.
Nevertheless, we suggest that the Index Company establish clear and mutually exclusive definitions for each theme, and in particular address potential overlaps among Artificial Intelligence, Cloud services, and Digital Solutions. For Frontier Technology, we recommend that eligibility be based primarily on substantive business contributions, verifiable technological capabilities, and commercialisation progress, and that a higher inclusion threshold be set to maintain the investment quality and stability of the index constituents.
Q1C. Expansion of Tech Sub-Themes (16 → 24)
Do you agree with the proposal to expand the relevant Tech Sub-Themes from 16 to 24 to align with the refined Tech Themes?
Reply: Agree.
Our association supports the expansion of the Tech Sub‑Themes from 16 to 24. The new framework adds coverage of areas such as AI infrastructure and applications, smart devices, advanced materials, new energy storage, aerospace and satellite technology, and quantum computing, which better aligns with the business diversification of technology companies and market developments. From the perspective of asset management and benchmark tracking, a more granular sub‑theme classification helps investors understand the index’s technological and industrial allocations and enhances the index’s differentiation as a benchmark for Hong Kong technology stocks.
However, as the number of sub‑themes increases, the classification criteria must be more rigorous. We suggest that the Index Company specify clear definitions, primary business judgment criteria, and applicable data sources for each sub‑theme, and establish classification principles for companies operating across multiple areas. For example, if a company simultaneously provides AI applications, cloud platforms, and automation solutions, it should be classified according to its primary revenue source, core technology, or operational focus, so as to maintain consistency in statistics and disclosure.
For sub‑themes that are still in relatively early stages of development or commercialisation, we recommend setting more prudent eligibility requirements, including a sustained operating track record, verifiable revenues of a material scale, and sufficient trading liquidity. This would prevent the index from over‑including companies that are highly conceptual but with limited investment capacity.
Question 2: Proposed Changes 2 – Introduce a Two‑Stream Selection Mechanism
Q2A. Eligible universe
Do you agree with the proposal to confine HSTECH’s eligible universe to the Hang Seng Composite LargeCap & MidCap Index?
Reply: Agree.
Our association agrees with the proposal to confine the eligible universe to the constituents of the Hang Seng Composite LargeCap & MidCap Index. The Hang Seng TECH Index has been widely used as a benchmark for ETFs, index funds, structured products, and derivatives. The liquidity, market capitalisation size, and freefloat of its constituents directly affect the execution efficiency, transaction costs, and tracking error of tracking products. Restricting eligible candidates to the large‑cap and mid‑cap universe helps ensure that the index has sufficient investment capacity and reduces the risk of price impact during quarterly rebalancing events.
From a risk management perspective, this arrangement also helps reduce the index’s reliance on thinly traded, low‑freefloat, or highly volatile stocks, thereby enhancing the index’s operationality across different market environments. For passive investment products, a stable and liquid constituent universe is more conducive to controlling actual replication costs.
Nevertheless, we suggest that the Index Company periodically review whether the eligible universe unduly excludes growth‑oriented small‑ and mid‑cap technology companies, particularly in light of the increasing number of new economy listings. The Company could consider conducting regular market coverage analysis to assess the representativeness of the current universe across different technology segments, and retain flexibility to adjust the eligibility threshold in the future without compromising investability.
Q2B. Two‑stream selection mechanism
Do you agree with the proposal to adopt a two‑stream selection mechanism – MV Stream (primary) and Sales Growth Stream (complementary)?
Reply: Agree.
Our association supports the proposed two‑stream selection mechanism, with Market Value as the primary criterion and Sales Growth as the complementary criterion. The MV Stream maintains the index’s core exposure to large‑cap, highly liquid, and market‑influential technology companies, while the Sales Growth Stream facilitates the inclusion of companies that have not yet reached the leading size tier but are experiencing rapid business expansion, thereby enhancing the index’s ability to reflect the growth dynamics of the technology sector.
However, the sales growth metric should be accompanied by fundamental and liquidity filters to mitigate the distortion that may arise from a single fiscal year’s data. We recommend that when assessing sales growth, the Index Company also consider minimum revenue scale, growth trends over a longer period, operating cash flow, earnings quality, and freefloat market capitalisation. Sales growth driven by a low base, M&A integration, one‑off items, changes in accounting standards, or asset disposals should be appropriately adjusted or excluded.
In addition, we suggest that the Index Company disclose in detail the calculation period for sales growth, data sources, treatment of exceptional data, and tie‑breaking mechanisms, so that investors and tracking product managers can reasonably anticipate potential changes. The Sales Growth Stream should also incorporate an appropriate buffer arrangement to balance the index’s forward‑looking nature with constituent turnover.
Q2C. Expansion of constituent number (30 → 50)
Do you agree with expanding the HSTECH from 30 to 50 constituents and selecting the top 40 constituents by MV rank and remaining 10 constituents by Sales Growth rank?
Reply: Agree.
Our association supports increasing the number of constituents from 30 to 50, with a structure comprising 40 constituents under the MV Stream and 10 under the Sales Growth Stream. The expansion helps improve the coverage of the technology sector and, by adding companies of varying sizes, business models, and technology areas, reduces the index’s dependence on a few dominant leaders. For investors, a broader constituent base also enhances the index’s representativeness as a benchmark for Hong Kong’s technology market.
At the same time, the newly added constituents should not undermine the index’s investment capacity. In particular, companies included via the Sales Growth Stream should meet clear minimum requirements for freefloat market capitalisation, turnover, freefloat ratio, and listing history, to ensure that ETFs and other tracking products can complete rebalancing at reasonable cost. We also suggest that the Index Company assess the trading depth and potential market impact of newly added stocks under stressed market conditions, rather than relying solely on average turnover data under normal market conditions.
Furthermore, we recommend that the MV Stream and the Sales Growth Stream adopt respective and appropriate buffer zones and replacement rules to reduce unnecessary quarterly turnover. The Index Company could periodically disclose post‑expansion concentration, liquidity, turnover, and constituent churn, allowing the market to evaluate whether the new structure achieves the intended balance between enhanced representativeness and maintained investability.
Question 3: Do you agree with implementing the proposed changes in the December 2026 index rebalancing?
Reply: Other (agree in principle to implement in December 2026, but suggest enhancing transitional arrangements).
Our association accepts in principle the implementation of the proposed changes in the December 2026 index rebalancing. Given that the revisions cover the eligible universe, theme classification, selection methodology, and number of constituents, reserving a market preparation period before the formal effective date is a reasonable arrangement. However, as the changes may bring about notable constituent adjustments and capital reallocation, the Index Company should provide sufficient information to the market to assist tracking funds, market makers, broker‑dealers, and derivatives participants in making orderly preparations.
We suggest that the final constituent list, constituent weights, theme classifications, the selection basis for the Sales Growth Stream, and estimated turnover rates be announced no less than 20 trading days prior to the effective date. If feasible, a reference list or simulated index data could also be provided before implementation, allowing the market to assess in advance potential trading demand and liquidity impact.
Should the final plan differ materially from the consultation version, we suggest that the Index Company provide clear explanations and, if necessary, extend the market communication period. For products that track a larger scale of assets, one‑off transitional arrangements could be considered to reduce concentrated trading, price volatility, and execution costs on the rebalancing day.
Question 4: Do you have any additional suggestions for HSTECH?
Reply: Yes.
In addition to the suggestions above, our association believes that Hang Seng Indexes Company could further strengthen ongoing monitoring and disclosure arrangements following the revision. As a market benchmark, an index should not only be representative but also enable fund managers and investors to understand its risk characteristics and potential transaction costs. We recommend periodic disclosure of weights by Tech Theme, constituent size, freefloat market capitalisation, turnover, the weight of the Sales Growth Stream, and constituent turnover rates.
At the same time, the Index Company should continuously monitor post‑expansion concentration and industry‑related risks. While increasing the number of constituents can diversify single‑stock weights, if the constituents are concentrated in similar customer bases, supply chains, technology pathways, or macro risk factors, the index’s actual diversification effect may be limited. Therefore, we suggest including risk analysis at the theme and correlation levels in periodic reports.
Finally, we recommend conducting a formal effectiveness review approximately one year after the implementation of the new regime, to assess the performance, liquidity, constituent stability, and actual turnover of the Sales Growth Stream. The Index Company should also publish its principles for handling theme classification revisions, financial data corrections, major corporate actions, and exceptional cases, so as to further enhance index governance and market confidence.
In summary, our Association strongly supports the proposed revisions to the Hang Seng TECH Index, as they will better align the index with the actual evolution of Hong Kong’s technology sector and enhance its value as an investment benchmark. We particularly emphasise the importance of rigorous classification frameworks, predictability of selection mechanisms, and market‑friendly transitional arrangements. All our recommendations are intended to assist Hang Seng Indexes in expanding the index’s coverage while maintaining its investment capacity, stability, and governance transparency.
We remain happy to discuss any details further and hope that the final plan will take due account of market feedback to gain broad industry acceptance. Should you have any questions regarding this reply, please do not hesitate to contact Council Member Duncan Cheng (tel: / email: ) or myself (tel: / email: ).
Your Sincerely,
Mofiz Chan
Chairman
Hong Kong Securities & Futures Professionals Association
Latest Advocacy Papers
Submission on the 2026 Policy Address
2026-08-04