During the National Day holiday, a piece of news might have slipped under the radar of ordinary investors, but I believe it will have a huge impact on the direction of Hong Kong's tech sector 鈥?the Hang Seng Tech Index is getting a major overhaul.
More stocks, looser rules, new economy names
After the Hong Kong market closed on October 7, Hang Seng Indexes Company officially announced revisions to the calculation methodology of the Hang Seng Tech Index. This is not a minor tweak 鈥?it is the first full-chain overhaul in six years since the index was launched. After reviewing the details, six words sum it up: expansion, loosening, and new inclusions.
Expansion: the number of constituent stocks will increase from 30 to 50, adding 20 more. Don't underestimate this number. Previously, the Hang Seng Tech Index had only 30 stocks, with a handful of internet platforms like Tencent, Alibaba, Meituan, and Kuaishou accounting for nearly half the weighting. The market had joked for years that it was a "food delivery index," meaning its ups and downs depended entirely on internet platforms and had little to do with actual technology.
Loosening: the original requirement that candidate companies must belong to five designated industries has been removed. The tech theme has been expanded from 16 sub-themes to 24, adding cutting-edge directions such as AI infrastructure, quantum computing, and new energy storage. The six major themes have been redefined: digital platforms, artificial intelligence, advanced hardware, robotics and automation, cloud computing, and frontier technology. This is what people mean by "technology" in 2026.
New inclusions: the most critical change is the introduction of a "dual-group stock selection" mechanism. Forty stocks are selected by market capitalization ranking as a safety net, while the remaining ten are chosen without regard to market cap 鈥?solely based on "revenue growth ranking over the past 12 months." There are also liquidity thresholds (three-month average daily turnover of no less than HK$100 million) and revenue thresholds (annual revenue of no less than HK$500 million for two consecutive fiscal years). This mechanism is essentially a fast track specifically designed for hard-tech companies with modest market caps but astonishing growth rates.
My first reaction upon seeing this was: this adjustment shows that Hong Kong's tech sector is no longer dominated by internet platforms alone.
Why this revision means business
Remember three numbers: 91%, 21%, and 32%.
91% is the index's market cap coverage of Hong Kong's tech sector after expansion, up from the current 85%, covering 6 more percentage points of tech companies. Don't dismiss those 6 points 鈥?they most likely represent AI chips, semiconductors, robotics, and intelligent driving 鈥?sectors that previously "couldn't get in."
21% is the median revenue growth of index constituents after including the revenue growth group, jumping from the current 14% to 21%. What does that mean? It means the index's overall growth profile has strengthened. Previously, only large-cap stocks were selected, and large caps grow slowly. Now, with ten high-growth small caps brought in, the entire index's "tech content" and "growth attributes" have been elevated by a notch.
32% is the revised weighting of advanced hardware (semiconductors, chips, consumer electronics hardware, etc.), up from 28% to 32%. The weighting of consumer discretionary (mainly internet platforms/e-commerce/food delivery) dropped from 49% to 44%. This shift in weightings represents a transformation of the index's underlying logic 鈥?from "internet platform-driven" to "hard tech plus internet dual-driven."
The scale of ETFs tracking the Hang Seng Tech Index is approximately RMB 270 billion, with over 40 linked products. On December 7, when the new rules take effect, these passive funds will rebalance according to the new weightings. Advanced hardware and newly included high-growth stocks will receive passive buying, while the weightings of old internet platforms will be moderately diluted.
Where the real value lies right now
Having covered the index itself, let me talk about something more important: valuation. I checked the latest data 鈥?the Hang Seng Tech Index's current forward PE is 14.6 times, with a historical percentile of just 7%. What does 7% mean? It means that over the past six years, only 7% of the time was it cheaper than now. This level is close to the extreme low hit during the "reciprocal tariff" shock in early April last year.
Cheap valuation is one thing; whether there's a catalyst is another. I believe this index revision is one such catalyst. The reasons are simple: First, after expansion, the index is more "usable," and more institutions will be willing to use it as a tool for Hong Kong tech allocation, with both passive and active funds increasing their positions. Second, the high-growth companies selected through the revenue growth group already have fast earnings growth, which will drive up the index's overall profit expectations. Third, with the increased weighting of hard tech, the index's correlation with current main themes like AI computing power, semiconductor domestic substitution, and robotics will rise, making it easier to command a sentiment premium.
There's another positive that many people overlook 鈥?the channel for insurance funds to invest in Stock Connect ETFs has officially opened. After regulatory clarification on September 30, the channel for insurance funds to allocate southbound to Stock Connect ETFs has been cleared. What is the style of insurance funds? They like buying large-cap indices, high-dividend stocks, and tool-type products. Although the Hang Seng Tech ETF is not purely high-dividend, it is the most core broad-based tool for Hong Kong tech 鈥?good liquidity, large scale, and representing the portfolio of China's highest-quality tech assets. Insurance funds cannot avoid it when allocating to Hong Kong tech.
Hang Seng Tech ETF Huaxia: A tool for ordinary investors to share in tech dividends
Having said all this, how can ordinary investors participate? The most direct way is to buy Hang Seng Tech ETF Huaxia (513180). Among all ETFs tracking the Hang Seng Tech Index, based on the data I've reviewed, Hang Seng Tech ETF Huaxia (513180) is currently the largest, with the latest scale of approximately RMB 41.6 billion, making it the leading product in its category. What does large scale mean? Good liquidity, low impact costs, small premiums/discounts, and large transactions are less prone to slippage.
Fund flows also tell the story. Over the past 10 trading days, 7 days saw net inflows, with total net inflows of approximately RMB 200 million. This shows that funds are buying more as prices fall. As a long-established Chinese fund company, Huaxia Fund's strength in index investing, especially ETF management, is widely recognized in the industry, and its tracking error control has consistently been solid.
Finally, some practical advice. First, don't see the "expansion is bullish" headline and go all-in at tomorrow's open. The new rules don't officially take effect until December 7. Before then, funds won't act immediately 鈥?short-term moves are mostly sentiment-driven. The real passive rebalancing will wait until after the new constituent list is published on November 20 and before the December effective date. Now is a positioning window, not a chase-the-rally window.
Second, it's a fact that Hong Kong stocks are at a low position now, but volatility is also high. A 3-5 point single-day swing in the Hang Seng Tech Index is normal. Before buying, think clearly about whether you can handle that volatility. Regular investing suits ordinary investors better than a lump-sum purchase.
Third, this ETF is a QDII product, and on-exchange trading carries premium/discount risk. If you see a premium exceeding 1-2%, don't chase it 鈥?wait for the premium to fall before buying, otherwise you'll "gain the index but lose on the premium."
When an index transforms from an "internet platform index" into a true "China tech broad-based index," when its valuation is still at the 7th percentile of history, and when long-term insurance capital and the ETF expansion dividend appear simultaneously, I think this direction deserves a serious look.
The above ETF primarily invests in financial instruments with good liquidity in the Hong Kong securities market. In addition to bearing general market volatility risks similar to domestic securities investment funds, it also faces special investment risks associated with overseas securities markets such as Hong Kong market risk, including the risk of large stock price fluctuations in the Hong Kong stock market, exchange rate risk, and risks arising from discontinuous trading days under the Stock Connect mechanism. The above fund has a risk rating of R4 (medium-high risk) and is an equity fund, with risk and return higher than mixed funds, bond funds, and money market funds. Individual stocks are not recommendations. Before investing in the fund, investors should carefully read the fund's legal documents such as the Fund Contract, Prospectus, and Product Summary, fully understand the fund's risk-return characteristics and product features, and thoroughly consider their own risk tolerance based on investment objectives, investment horizon, investment experience, and asset status. On the basis of understanding the product and suitability opinions, investors should make rational judgments and prudent investment decisions, and independently bear investment risks. Index performance does not represent product performance, and secondary market price performance does not represent net asset value performance. This fund is an ETF, and investors face potential risks such as tracking error control failing to meet agreed targets, the index compiler ceasing services, constituent securities suspension, deviation of the underlying index return from the average stock market return, underlying index volatility, deviation of the fund portfolio return from the underlying index return, underlying index changes, secondary market trading price premium/discount risk, subscription/redemption list errors, risks related to IOPV-based decisions and IOPV calculation errors, delisting risk, investor subscription/redemption failure risk, liquidity risk of fund share redemption consideration, and derivative investment risk. MACD golden cross signals have formed; these stocks are performing well!