Bank of China, Sinopec to Join Hang Seng Stock Index

November 14, 2006 at 11:10 am (China, Companies, Economics, Investment)

From Bloomberg By Hanny Wan and Darren Boey

 

Bank of China Ltd. and China Petroleum & Chemical Corp., known as Sinopec, will be added to Hong Kong’s Hang Seng Index after a quarterly review of the stock benchmark, the compiler said.

The number of constituents on the Hang Seng will rise to 36

from 34, HSI Services Ltd. said in a statement after the market

closed today. No deletions were announced. The changes will take

effect on Dec. 4, the index provider said.

Bank of China and Sinopec, so-called H shares of companies

incorporated in mainland China, had been tipped for inclusion by

brokerages such as Nomura International (Hong Kong) Ltd.

The addition reflects the Chinese companies’ growing

presence on Hong Kong’s stock market. The exchange’s Web site

shows H shares at the end of October accounted for 21 percent of

the value of the main board, up from 1.5 percent at the end of

1997, the year the U.K. returned Hong Kong to China.

Bank of China and Sinopec’s inclusion “is evidence that H-

shares are getting more important,” said Kent Yau, deputy head

of research at Core-Pacific Yamaichi International in Hong Kong.

“If you look at the trading volume of H shares, they’re getting

bigger and bigger.”

The number of Hang Seng members will be gradually increased

to 38 to include H shares, HSI Services said in June. China

Construction Bank Corp., the nation’s fourth-largest lender, was

the first H share to join the stock benchmark after the index

compiler’s August quarterly review.

 

Shares of Bank of China, the nation’s second-largest lender,

have climbed 16 percent since they were sold in an initial public

offering at the end of May. Sinopec, Asia’s largest oil refiner,

has surged 47 percent this year.

“Bank of China was a bit of a surprise,” Yau said. “Short

term it’s going to get a boost. It’s positive news. Investors will

probably start to accumulate” before the changes take effect.

HSI Services determines constituents based on criteria such

as market value and trading volume. Adjustments would prompt

funds that mirror the stock benchmark, such as the $3.4 billion

Tracker Fund of Hong Kong, to buy stocks that are added.

Exchange-traded funds may have to buy HK$475.3 million

($61 million) of Sinopec shares and HK$579.4 million of Bank of

China shares in response to the inclusion in the Hang Seng, Sandy

Lee, an analyst at Nomura, said in an e-mail after HSI Services’

statement was released.

Bank of China has a market value of HK$851 billion, behind

HSBC Holdings Plc and China Mobile Ltd. among existing Hang Seng

Index members.

Sinopec, Asia’s biggest refiner, is valued at HK$562 billion,

which would put it behind Construction Bank, currently the

measure’s third-biggest company.

HSI Services also said it will start an index to measure the

H shares of Chinese financial-related companies from Nov. 27. The

Hang Seng China H-Financials Index will track five lenders

including Bank of China and Construction Bank, and three insurers

such as China Life Insurance Co.