Standard & Poor’s is set to create a new series of indices for the Hong Kong market. Eventually, the new indices are expected to replace the existing All Ordinaries Index.
An agreement was signed between S&P and Hong Kong Exchanges and Clearing, the holding company of the Stock Exchange of Hong Kong. The Hong Kong market is the tenth largest international stock market in the world in terms of market capitalisation, and the second largest in Asia.
The new index series will cover stocks selected from HKEx’s Main Board, the parties said. The series will include three new Main Board indices. The S&P/HKEx 25 will comprise 25 large-cap stocks and represent about 75% of the Main Board’s market capitalisation. Other indices to be created will be the S&P/HKEx MidCap 25 and the S&P/HKEx SmallCap 50.
S&P will also calculate a composite of these three indices called the S&P/HKEx Composite.
As well as these indices, S&P will create a new S&P/HKEx index covering HKEx’s GEM (Growth Enterprise Market). Standard & Poor’s will calculate and manage the indices, and disseminate real-time values of the indices in October.
HKEx’s chief executive H C Kwong said the new indices would facilitate the development of derivative products.
Chairman and CEO of S&P’s parent company McGraw-Hill, Harold McGraw III, said the new index series recognised the increasingly complementary nature of the economies of Hong Kong and the mainland of China. “We believe investors throughout the world will embrace the new indices as the best representation of the region’s equity market,” he said.
All shares listed on the exchange will be eligible for inclusion in the new index series, including those of mainland companies. The basic criteria for a stock’s inclusion are adequate float and liquidity; financial viability; market capitalisation and economic sector representation, S&P says.
The indices will be free-float adjusted, and the sector breakdowns will be based on the Global Index Classification Standard (GICS).
It also says it expected the new S&P/HKEx index series would eventually replace HKEx’s existing All Ordinaries Index and Growth Enterprise Index. It will seek to license financial products based on the indices including exchange-traded funds, index funds, futures, and options and will promote the indices as benchmarks for asset managers.
Standard & Poor’s says it plans to open an index services office in Hong Kong. This, it says, would complement its existing financial information and credit rating operations in the former colony.
Managing director of the company’s index business in the Asia-Pacific region would be David Collins of Standard & Poor’s Japan, the company says. Collins will relocate to Hong Kong.
This new Hong Kong office will serve as the regional headquarters for the Asia-Pacific Index Services business. Standard & Poor’s already has other Asia-Pacific Index Services offices in Tokyo and Sydney.