Pop Mart and Healthcare Stocks Propel Hang Seng Index Competitors

Analysts anticipate that Hang Seng Indexes Co will include Pop Mart International Group, known for the Labubu doll, as well as several healthcare firms in its Hong Kong stock benchmark.

Pop Mart has long been seen as a potential candidate for the Hang Seng Index, with its market capitalization increasing more than threefold this year due to a surge in demand for its toys and figurines. The healthcare sector is also gaining momentum, fueled by innovations and international partnerships that have improved its overall performance. The results of the quarterly review are expected to be revealed after market hours on Friday.

This review is closely watched as it reflects the performance of publicly listed companies based on crucial metrics like market capitalization and turnover. Inclusion can attract investment from index-tracking funds, particularly as mainland investors have shown substantial interest, making the HSI one of the top-performing major stock indices worldwide.

As noted by Janaghan Jeyakumar, an analyst at Quiddity Research, Pop Mart ranks “very highly in terms of market cap and/or turnover.”

The toy manufacturer has also been spotlighted as a likely candidate by Periscope Analytics founder Brian Freitas and Kevin Liu, an analyst from China International Capital Corp.

Both Jeyakumar and Freitas agree that healthcare stocks will play a crucial role in this review. The sector is currently underrepresented, given that the index aims to represent at least 50% of the market cap for each industry group, as stated by Freitas, who writes for Smartkarma.

“The Hang Seng Indexes should incorporate stocks from the healthcare sector to meet the 50% market cap criteria,” he emphasized, mentioning skin treatment pioneer Giant Biogene Holding Co. as a likely addition.

Freitas’ additional recommendations included Kingsoft Corp, China Telecom Corp, JD Logistics, and Cosco Shipping Holdings, alongside Pop Mart.

While the index does occasionally remove members, it aims to expand to 100 constituents from its current total of 85.

Freitas highlighted that, based on current market cap coverage, the index should be in a growth phase. However, he remarked, “the reality might differ, as the index committee appears hesitant to rapidly approach 100 constituents or ensure sufficient representation among various industry groups,” he commented.

Changes to the index will take effect on September 8, as previously announced.

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