Hong Kong Exchanges and Clearing Limited (HKEX) announced on August 18 a revamp of the methodology for the HKEX Technology 100 Index. The updated methodology will be implemented in tandem with the September quarterly index review, with constituent changes taking effect after the market close on September 11 and becoming effective from September 14. The multi-dimensional rule enhancements are designed to significantly strengthen the index's representation of Hong Kong's technology industry landscape.
The E Fund (HK) HKEX Technology 100 Index ETF (03456), which closely tracks this benchmark, stands to benefit directly from this upgrade, positioning itself as a high-quality vehicle for investors seeking exposure to Hong Kong's frontier technology sectors. The optimization targets three key areas: technology theme classification, constituent adjustment rules, and weight caps, thereby improving the index's ability to reflect structural shifts within Hong Kong's tech ecosystem.
Where to begin
In terms of technology themes, the new methodology explicitly defines the artificial intelligence theme to encompass companies involved across the entire AI value chain, including AI chips, AI infrastructure, AI models, and AI applications. The information technology theme has been expanded to add an aerospace technology sub-theme, broadening coverage of emerging tech industries. For the internet theme, new requirements stipulate that companies must demonstrate research and development efforts generating revenue or investment in one or more of the other five major technology themes, thereby reducing the weighting of purely platform-based enterprises.
What about the rules for constituent changes
Regarding constituent adjustment rules, the new methodology introduces quarterly index reviews and optimizes the listing duration requirements for A+H companies. The new quarterly adjustment rule operates as follows: since the last semi-annual index review, if a security is included in the Stock Connect for the first time after listing, or meets the listing duration criteria, and satisfies all eligibility requirements, and ranks within the top 80 by average daily market capitalization over the past year, it will be added to the index. The lowest-ranked constituent will then be removed to maintain the index's 100-stock count. For A+H listed companies, the earlier of their A-share or H-share listing dates will be used when assessing index inclusion eligibility, effectively accelerating the inclusion process for such tech enterprises.
Why limit the weights
On the weighting front, the cap for each constituent stock will be lowered to 8%, while a new 25% cap on industry-level weightings has been introduced. Leveraging this comprehensive index upgrade, the E Fund (HK) HKEX Tech 100 ETF will precisely cover six frontier technology tracks: artificial intelligence, biotech and pharmaceuticals, intelligent driving, information technology, internet, and robotics. Compared with traditional benchmarks like the Hang Seng Index and the Hang Seng Tech Index, the upgraded HKEX Technology 100 Index highlights its differentiated advantages, emerging as a new gauge reflecting the development of China's technology sector.
The E Fund (HK) HKEX Technology 100 ETF (03456), with its alignment with industry trends and enhanced risk diversification, serves as a prime allocation target for investors aiming to tap into Hong Kong's core technology strengths and capture growth dividends from tech innovation.