Hang Seng Indexes Co is likely adding Labubu doll-maker Pop Mart International Group and several health-care firms to its Hong Kong stock benchmark, analysts say.
Pop Mart has been a frequent contender for inclusion in the Hang Seng Index, with its market capitalisation more than tripling this year amid strong demand for its toys and figurines. Health-care stocks have also gained momentum, driven by breakthroughs and overseas partnerships that have lifted sector performance. The results of the quarterly review are expected to be released after the market closes on Friday.
The review is closely watched as a signal of which listed companies have excelled across key metrics, such as market capitalisation and turnover. Inclusion can attract investments from index-tracking funds at a time when mainland investors’ appetite has made the HSI one of the world’s top-performing major stock gauges.
Pop Mart ranks “very highly in terms of market cap and/or turnover,” Janaghan Jeyakumar, an analyst at Quiddity Research, said.
The toymaker was also named as a likely pick by Periscope Analytics founder Brian Freitas and Kevin Liu, an analyst at China International Capital Corp.
Jeyakumar and Freitas agreed that health-care stocks would play a key role in the review. The industry is underrepresented as the index aims to cover at least 50% of the market cap of each industry group, according to Freitas, who publishes on Smartkarma.
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“Hang Seng Indexes should be adding stocks from the health care group to bring the market cap coverage up to 50%,” he wrote, predicting skin treatment developer Giant Biogene Holding Co. as a likely addition.
Freitas’ other picks included Kingsoft Corp, China Telecom Corp, JD Logistics Inc and Cosco Shipping Holdings Co, alongside Pop Mart.
While the index occasionally removes members, it aims to eventually expand to 100 constituents from the current 85.
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Based on the current market cap coverage, the index should be in expansion mode, Freitas said. But “the reality could be very different with the index committee showing that they are in no hurry to get up to 100 index constituents, nor to ensure that the different industry groups have adequate representation in the index,” he said.
Any changes to the index will take effect starting Sept. 8, it said in a statement last month.
