ICBC and China Life Will Join Hang Seng Index (Update1)
By Hanny Wan
Feb. 9 (Bloomberg) -- Industrial & Commercial Bank of China Ltd. and China Life Insurance Co. will join Hong Kong's Hang Seng Index following a quarterly review of the stock benchmark.
The number of constituents on the Hang Seng Index will rise to 38 from 36, HSI Services Ltd. said in a statement after the market closed today. No deletions were announced. Membership will gradually be expanded to 50, the statement said. The changes will take effect after market closes on March 9, it said.
The adjustments to the index will prompt funds that mirror the benchmark, such as the HK$26.56 billion ($3.39 billion) Tracker Fund of Hong Kong, to adjust their holdings. ICBC and China Life had been tipped for inclusion by brokerages including Macquarie and Nomura Holdings Inc. and their shares surged 3.5 percent and 6.2 percent respectively this week.
``Those are hot picks,'' said Tacky Cheng, a Hong Kong-based analyst at Macquarie Bank Ltd. who correctly predicted the two changes. ``The additions reflect the increasing importance of Chinese companies in Hong Kong, and the trend that there'll likely be more of these companies listed here.''
Shares of companies incorporated on the mainland, called H shares, have been eligible for inclusion in the benchmark since the August quarterly review to reflect their growing importance in the local market. China Construction Bank Corp., Bank of China Ltd. and China Petroleum & Chemical Corp. were previously added.
Weighting Cap
The representation any one company in the Hang Seng Index will be capped at 20 percent, down from 25 percent, the statement said. The weighting of HSBC will be cut to that level from 22 percent, and that of China Mobile Ltd. will be reduced to 16 percent from 21 percent, it said.
China Life will make up 3.5 percent of the benchmark, and ICBC will account for 3.1 percent, the statement said.
HSI Services, which compiles Hong Kong's stock indexes, determines constituents based on criteria such as market capitalization and trading volume.
The 50 stocks that will eventually be included in the index will comprise 70 percent of total market value, HSI Services General Manager Vincent Kwan, said at a media briefing in Hong Kong today.
Shares of ICBC, China's largest lender, soared 52 percent since they were sold in an initial public offering and started trading on Oct. 27. It has a market value of HK$1.6 trillion, second only to HSBC Holdings Plc among non-U.S. banks.
Stock in China Life, the country's biggest insurer, has almost tripled in the past year. The company is valued at HK$935.86 billion, making it the world's second-biggest insurer by market value, after American International Group.
HSI Services also announced that ICBC, China Communications Services Corp., China Communications Construction Co., China Coal Energy Co., and China Merchants Bank Co. will be added to the Hang Seng China Enterprises Index, expanding its membership to 41 from 37.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
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