Saturday, August 15

An insight to the Hang Seng Technical Index

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On July 27, Hong Kong Exchange launched the Hang Seng Tech Index (HSTI) that captured the eyes of many regional investors and funds. This came as a surprise within a month after the China announced the National security Law in Hong Kong.

The Hang Seng Tech Index features 30 of the largest tech firms listed in Hong Kong, which are among the world’s biggest companies. The new index comes as Chinese tech firms face greater scrutiny in the US and threatened to be removed from US market by Trump administration.

Amid the tension of US-China conflict, NetEase and JD.com are the tech giants that have recently listed in Hong Kong and have been included in the new Hang Seng Tech Index.

Besides that, the Ant Group is viewed as the world’s most valuable unicorn – a start-up that has grown to a value of more than US$1 billion and seeks to list in Hong Kong and Shanghai in coming months. Once publicly listed, it should also move into the HSTI market.

According to market experts, it will be more convenient for investors who want to buy Chinese tech companies listed in Hong Kong now that they have their own index.

There is huge appetite for technology stocks like Alibaba and Tencent, which have generally performed well during the coronavirus crisis.

The new index could trigger the launch of specialised investment funds tracking these 30 tech stocks, which are known as exchange traded funds (ETFs).

On the other side note, some analysts predict the US banking system might soon put a sanction on HK dollar and oust out of SWIFT system by unpeg the US dollar/HK dollar rate. Since 1983, the HK dollar has been pegged to the US dollar at a rate of 7.8.

The Hong Kong Monetary Authority (HKMA) has been monitoring the movement range from 7.75 to 7.85 over the decades. The peg has saved the Hong Kong dollar from falling during past crisis like 1987 crash, 1997 Asian crisis and 2008 Subprime crisis.

In order to prepare for such unpegging activity that may be announced before year-end and trigger a fearful depreciation in HK dollar, this immediate remedy of launching the HSTI will aim to attract regional fund into Hong Kong domicile and generate high demand for HK dollar as a settlement for the equity investment.

In any case, we are delighted to know that there is one more fruitful basket for investors to consider nesting their investment in years to come. Stay tune for the market growth in Hong Kong and its capital market after striving through this hard time!

Dar Wong is a professional in financial markets based in Singapore. The expression is at his sole opinion. He can be reached at [email protected]