The Hang Seng TECH index was released on Monday and contains the internet giant Alibaba.

Hong Kong launches technology giant stock index

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The Hong Kong equity market has launched a new equity index that focuses on China's technology giants.

The Hang Seng Tech Index was released on Monday and includes internet giants such as Tencent, Alibaba and JD.com.

There will be 30 of the largest technology companies listed in Hong Kong, which are among the largest companies in the world.

The new index will be launched as Chinese technology companies in the United States are scrutinized. Many check listings in both Hong Kong and China.

Alibaba's billionaire founder Jack Ma recently announced plans to list his Ant Group subsidiary in Hong Kong.

Alibaba, NetEase and JD.com are three technology giants that were recently listed in Hong Kong under the growing tensions between the United States and China. They are included in the new Hang Seng Tech Index.

The Ant Group is described as the most valuable unicorn in the world – a start-up that has grown to a value of more than USD 1 billion (GBP 778 million).

As soon as it is publicly listed, it should also be included in the index.

Ant Group, a financial technology company (Fintech), also wants to be listed on China's tech-centric Star stock market as it avoids a US listing.

Analysts say the Hang Seng Tech Index will attract investors to other tech stocks in Hong Kong and look beyond the more popular Hang Seng Index, which is dominated by banks, real estate companies, and energy companies.

"The new index is designed to compete with and beat Nasdaq in the US market for Chinese technology giants," said Bruce Pang, director of macro and strategy research at China Renaissance Securities.

The Hang Seng Tech Index lists companies listed in Hong Kong that are heavily involved in selected technology topics such as the Internet, fintech, cloud, e-commerce and digital activities.

"The Chinese government wants its technology companies to have access to foreign capital, so an index in Hong Kong would be better suited for that purpose," added Tianjun Wu, deputy economist for the Economist Intelligence Unit.

What does that mean for investors?

Investment experts say it will be more convenient for investors who want to buy Hong Kong-listed Chinese technology companies as soon as they have their own index.

There is a great appetite for technology stocks like Alibaba and Tencent, which generally performed well during the coronavirus pandemic as more and more people shop and chat online.

The new index could trigger the launch of specialized mutual funds that track these 30 technology stocks known as Exchange Traded Funds (ETFs).

"This is a great and positive innovation that marks the continued growth of the Chinese technology sector, its spirit and portfolio share with local and international investors alike," added Andy Maynard, general manager of China Renaissance Investment Bank.