Hang Seng Indexes Quarterly. Index Research: Hang Seng China Enterprises Index rd Quarter

Transcription

1 Hang Seng Indexes Quarterly Index Research: Hang Seng China Enterprises Index rd Quarter

2 Hang Seng Family of Indexes Flagship Indexes Benchmark Indexes Thematic Indexes Strategy Indexes Bond Indexes listed Hang Seng Hang Seng Index Hang Seng Composite Index China Enterprises Index HSI Volatility Index Finance Utilities Properties Commerce & Industry Hang Seng Composite Industry Indexes Energy Materials Industrials Consumer Goods Consumer Services Telecommunications Utilities Financials Properties & Construction Information Technology Conglomerates Hang Seng Foreign Companies Composite Index Hang Seng Global Composite Index Hang Seng Corporate Sustainability Benchmark Index Hang Seng Composite Size Indexes LargeCap Index LargeCap & MidCap Index MidCap Index MidCap & SmallCap Index SmallCap Index Hang Seng ChinaAffiliated Corporations Index Hang Seng China HFinancials Index Hang Seng China (listed) 100 Index Hang Seng China (listed) 25 Index Hang Seng HK 35 Hang Seng REIT Index Hang Seng Corporate Sustainability Index Hang Seng High Dividend Yield Index Hang Seng Low Volatility Index Hang Seng High Beta Index Hang Seng Sector Index Series Hang Seng IT Hardware Index Hang Seng Mainland Banks Index Hang Seng Mainland Healthcare Index Hang Sang Mainland Oil & Gas Index Hang Seng Mainland Properties Index Hang Seng Software & Services Index Hang Seng Consumer Goods & Services Index Hang Seng Risk Adjusted Index Series Hang Seng Risk Adjusted Index HSI 20% Hang Seng Risk Adjusted Index HSCEI 25% Hang Seng Short & Leveraged Index Series Short Indexes HSI Short Index HSCEI Short Index Hang Seng HFin Short Index HSI 2x Short Index HSCEI 2x Short Index Hang Seng HFin 2x Short Index Leveraged Indexes HSI Leveraged Index HSCEI Leveraged Index Hang Seng HFin Leveraged Index Hang Seng Equal Weighted Index Hang Seng China Enterprises Equal Weighted Index Hang Seng Futures Index Series Hang Seng Futures Index H ang Seng Futures RMB FX Index Hang Seng China Enterprises Futures Index Hang Seng China Enterprises Futures RMB FX Index Hang Seng ibond Composite Total Return Index Hang Seng ibond 1808 Total Return Index Hang Seng ibond 1906 Total Return Index Hang Seng Markit iboxx Offshore RMB Bond Index family Hang Seng Markit iboxx Offshore RMB Bond Overall Index Hang Seng Markit iboxx Offshore RMB Corporates Bond Index Hang Seng Markit iboxx Offshore RMB China Government Bond Index Hang Seng Markit iboxx Offshore RMB NonSovereigns Bond Index Hang Seng Markit iboxx Offshore RMB Large Cap Bond Index Hang Seng Markit iboxx Offshore RMB High Yield Bond Index Hang Seng Markit iboxx Offshore RMB Investment Grade Bond Index Hang Seng Healthcare Index Hang Seng Internet & Information Technology Index Hang Seng Stock Connect Index Hang Seng Stock Connect MidCap & SmallCap Index Hang Seng Stock Connect SmallCap Index Hang Seng SCHK Mainland China Banks Index Index that tracks China sector Hang Seng Indexes Quarterly 3rd Quarter 2017 Hang Seng SCHK High Dividend Low Volatility Index

3 Flagship Indexes Benchmark Indexes Thematic Indexes Strategy Indexes Bond Indexes Crossmarket Hang Seng China 50 Index Hang Seng Stock Connect China AH Premium Index Hang Seng Stock Connect China AH (A + H) Index Hang Seng Stock Connect China AH Smart Index Hang Seng Stock Connect China AH (A) Index Hang Seng CSI Shanghai AH Smart Index Hang Seng Stock Connect China AH (H) Index Hang Seng China Enterprises Smart Index Hang Seng (Mainland and HK) Corporate Sustainability Index Hang Seng Shenzhen Index Hang Seng Shenzhen Financials Index Hang Seng Shenzhen Consumption Index Hang Seng Shenzhen Real Estate Index Hang Seng Shenzhen Information Technology Index Hang Seng Shenzhen Infrastructure & Transportation Index Mainlandlisted Hang Seng China A Industry Top Index Hang Seng (China A) Corporate Sustainability Benchmark Index Hang Seng (China A) Corporate Sustainability Index Hang Seng China A Top 100 Index Index that tracks China sector Hang Seng Indexes Quarterly 3rd Quarter

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5 Company Profile Hang Seng Indexes Company Limited ( Hang Seng Indexes ), a whollyowned subsidiary of Hang Seng Bank, was established in 1984 and is s leading index compiler covering and mainland China markets. Hang Seng Indexes calculates and manages the Hang Seng Family of Indexes. Starting in 1969 with the launch of the Hang Seng Index, now widely recognised as the barometer of the stock market, Hang Seng Indexes has been at the forefront of the market, developing numerous market measures to help investors make their investment decisions. Indexes in the Hang Seng Family of Indexes are grouped into five categories Flagship Indexes, Benchmark Indexes, Thematic Indexes, Strategy Indexes and Bond Indexes then classified as listed, Crossmarket or Mainlandlisted according to where their constituents are listed. Currently, the Hang Seng Family of Indexes comprises over 400 realtime and daily indexes. Going forward, Hang Seng Indexes will continue to broaden its index series to meet the widening spectrum of investor demand for index investment solutions. If you prefer not to receive marketing materials from Hang Seng Indexes Company Limited in the future, please notify us by to info@hsi.com.hk with the word unsubscribe in the subject line or contact us at (852) Hang Seng Indexes Quarterly 3rd Quarter

6 0 Hang Seng Indexes Quarterly 3rd Quarter

7 Contents Features What s New Index Update Index Research Index Information Index Products Index Performance Index Rankings Other Information Hang Seng Industry Classification System 19 Hang Seng Indexes Quarterly 3rd Quarter

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9 What s New Hang Seng Indexes Licenses Fubon to Use Hang Seng China Enterprises Index as Basis for ETF In July 2017, Hang Seng Indexes Company Limited ( Hang Seng Indexes ) licensed the Hang Seng China Enterprises Index ( HSCEI ) to Fubon Asset Management Company Limited ( Fubon ) to serve as the underlying index for the creation of an exchangetraded fund( ETF ). The ETF was listed on the Taiwan Stock Exchange today. The HSCEI is the leading barometer for tracking the performance of mainland China enterprises listed in. Earlier in 2016, Fubon launched two ETFs that track the HSCEI Short Index and the HSCEI Leveraged Index respectively in Taiwan. The launch of the new ETF provides Taiwanese investors with a wider range of HSCEI products with different risk exposures. Hang Seng Indexes Licenses Da Cheng to Use Hang Seng Index as Basis for LOF In August 2017, Hang Seng Indexes Company Limited ( Hang Seng Indexes ) licensed the Hang Seng Index ( HSI ) to Da Cheng Fund Management Company Limited ( Da Cheng ) to serve as the underlying index for the creation of a listed openended fund ( LOF ). The LOF was listed on the Shenzhen Stock Exchange. The HSI is an indicator of the performance of the stock market. The new LOF will bring the number of exchangetraded products linked to indexes in the Hang Seng Family of Indexes to 66 with listings on 17 different stock exchanges across the world. As at 30 June 2017, assets under management in exchangetraded products linked to indexes in the Hang Seng Family of Indexes had reached a total of more than US$27 billion. Hang Seng Indexes Announces Hang Seng China Enterprises Index Enhancement Details In August 2017, Hang Seng Indexes Company Limited ( Hang Seng Indexes ) announoced the key elements of the Hang Seng China Enterprises Index ( HSCEI ) enhancement. Definition of Pchips Pchips will be determined by considering their business exposure. Pchips are companies that have more than 50% of their sales revenue (or profits or assets, if more appropriate) derived from mainland China but are not Hshares or Redchips. Number of Redchips and Pchips to be added to HSCEI A collective total of 10 Redchips and Pchips will be added to the HSCEI. The number of Hshares constituents in the index will remain at 40. The total number of constituents will therefore increase from 40 to 50 after the change. Additional Eligibility Screenings for Redchips and Pchips To address the different risk profiles of Redchips / Pchips as compared with Hshares, it has been decided that additional eligibility screenings will be applied for potential incoming Redchips / Pchips constituents. The constituent selection criteria for Hshares will remain unchanged. Selection of 10 Redchips and Pchips constituents Eligible Redchips and Pchips will be selected by combined market capitalisation rank (an overall rank considering both full market capitalisation and freefloatadjusted market capitalisation), which is the same as the constituent selection method for Hshares in the HSCEI. The additional 10 Redchips and Pchips constituents will be selected in the index review with a data cutoff of enddecember The announcement will be made in February 2018 together with the regular index review results. Implementation of Adding 10 Redchips and Pchips constituents To minimise the potential impact on the market, the 10 Redchips and Pchips constituents will be added to the HSCEI in five phases over a period of 12 months. Hang Seng Indexes Quarterly 3rd Quarter

10 Index Update Hang Seng Stock Connect China AH Premium Index Performance of the Hang Seng Stock Connect China AH Premium Index 2017Q3 Highlights The Hang Seng Stock Connect China AH Premium Index ( HSAHP ) closed at at the end of the third quarter of 2017, indicating that A shares of duallisted companies were, on average, 32% more expensive than their H share counterparts. When compared with the previous quarter, the median of AH Price Ratio of Properties has dropped, implying a narrowing of the price gap between A shares and H shares in this sector. Past 1year HSAHP Performance High Low Close 3M Y Sep16 Dec16 Mar17 Jun17 Sep17 Distribution of AH Price Ratios as at Latest Quarterend 12 C&I UTI FIN PROP No. of Companies >250 AH Price Ratio C&I: Commerce and Industry FIN: Finance UTI: Utilities PROP: Properties Industry Max. AH Price Ratio by Industry as at the End of the Latest Two Quarters 2017Q3 2017Q2 Min. Avg.* Median Max. Min. Avg.* Median C&I UTI FIN PROP Based on Hang Seng Index Industry Classification * Simple average of AH Price Ratio 3 Hang Seng Indexes Quarterly 3rd Quarter

11 Index Update Hang Seng HK 35 Performance of the Hang Seng HK Q3 Highlights The Hang Seng HK 35 ( HSHK35 ) closed at at the end of the third quarter of 2017, with a positive yeartodate return of 24.51%. The annualized volatility of HSHK35 was 9.77%, lower than that of HSI and HSML25. Its Sharpe ratio* was 1.62, higher than that of HSI and HSML25. The industry weightings of the HSHK35 were more evenly distributed compared with the HSI and the HSML25. As at the end of the third quarter of 2017, Finance (37%) was the biggest industry in the HSHK35, followed by Commerce and Industry (26%) and Properties (25%). 1Year Rebased Performance HSHK35 HSI HSML Sep16 Dec16 Mar17 Jun17 Sep17 Hang Seng HK 35 ( HSHK35 ) Hang Seng Index ( HSI ) Hang Seng China (listed) 25 Index ( HSML25 ) As at 29 September 2017 Index Closing Index Level 3mth Index Return YTD 1yr 1year Ann. Vol. Sharpe Ratio* HSHK % 24.51% 15.85% 9.77% 1.62 HSI % 25.24% 18.27% 11.39% 1.60 HSML % 22.25% 16.77% 13.82% 1.21 *Calculated using 1year index return and 1year annualized volatility with assumption that risk free rate is 0. Industry Distribution As at 29 September 2017 Commerce and Industry Utilities Properties Finance 100% Index Weight (No. of Constituents) 80% 60% 40% 20% 37% (6) 25% (11) 12% (4) 26% (14) 48% (12) 51% (11) 11% (10) 7% (3) 5% (5) 37% (23) 42% (11) 0% HSHK35 HSI HSML25 Hang Seng HK 35 ( HSHK35 ) Hang Seng Index ( HSI ) Hang Seng China (listed) 25 Index ( HSML25 ) Hang Seng Indexes Quarterly 3rd Quarter

12 Index Research Hang Seng China Enterprises Index Evolving alongside the market Highlights: The Hang Seng China Enterprises Index ( HSCEI ) was launched in 1994 to cover the Hshares segment. The index has grown into a leading market benchmark for the China sector listed in, with sizable funds tracking the index and an active related derivatives market. However, structural changes in the market over the years have resulted in the index overconcentrating in Financials and becoming less representative of the China sector. History and Market Development Fig.1: Timeline Shortly after the listing of the first Hshare, Tsingtao Brewery in 1993, the HSCEI was launched (in 1994) with 10 constituents in the index. The Hshares market thrived when large Chinese Stateowned enterprises began listing in in the form of Hshares since In 2003 and 2004, the first ETF for HSCEI was launched and index futures and options were also made available to investors. The listing of Mainland banks and insurance companies since 2005 has helped drive the overall boom of the Hshares market. Year Events Listing of first Hshare Launch of Hang Seng China Enterprises Index Listing of large Stateowned enterprises in the form of Hshares begins (e.g. PetroChina, Sinopec) Launch of [first related] ETF and trading of index futures commences Trading of index options commences Listing of Mainland banks and insurance companies in the form of Hshares begins (e.g. CCB, Bank Of China, PingAn Insurance) Growing into leading market benchmark for China sector listed in market HSCEI has grown into a leading market benchmark since the launch of related index products and derivatives. The index has been widely adopted as a proxy for the China sector listed in. Funds tracking the HSCEI have grown in size, especially in recent years. In 2015, the flourishing China Ashares market stimulated the China sector listed in. Assets under management doubled over the year to exceed USD 8 billion, and peaked at USD 9.2 billion by the end of Derivatives tracking the HSCEI have enjoyed even more remarkable growth. As at 31 August 2017, the average daily turnover of HSCEI futures was comparable to that of the Hang Seng Index ( HSI ). The average daily turnover of HSCEI options was around twice that of HSI options. In 2012, HSCEI options overtook HSI options in terms of open interest. With nearly 3 million contracts at the end of August 2017, the number of HSCEI options was more than five times larger than that of HSI options. Fig.2: Assets under management of listed index products AUM ($US Mn) 25,000 20,000 15,000 10,000 5, , ,000 80,000 40, , ,000 80,000 40, , , , , , ,000,000 3,000,000 2,000,000 1,000, Data cutoff as at 31 August 2017 Fig.3: Average daily turnover of index derivatives Number of Contract(s) Number of Contract(s) Number of Contract(s) Number of Contract(s) HSCEI HSCEI Futures HSCEI Option HSI HSI Futures Fig.4: Open interest of index derivatives HSCEI Futures HSCEI Option HSI Option HSI Futures HSI Option Index Futures Index Options Index Futures Index Options Data cutoff as at 31 August Data cutoff as at 31 August Hang Seng Indexes Quarterly 3rd Quarter

13 Index Research Hang Seng China Enterprises Index Evolving alongside the market Decreasing representativeness of Hshares As mentioned in the previous section, the HSCEI has grown into a leading market benchmark for the China sector listed in. Yet, structural changes in the market have decreased the index s representativeness for the China sector. Hshares, which is the sole share class currently covered by the HSCEI, accounted for more than 40% and 60% of the China sector in terms of market capitalisation and turnover respectively before As at the end of 2016, these percentages had dropped to around 30% and 50% respectively. On the other hand, Pchips (i.e. Mainland securities that are neither Hshares nor Redchips) have been gaining more influence in the sector. In 2015, Pchips overtook Hshares in terms of market capitalisation, accounting for 40% of the China sector as at the end of Turnover of Pchips has doubled over the past 10 years to account for around 30% in The industry distribution of Hshares also deviates significantly from that of China sector. For example, when compared to that of the China market proxy*, Financials is significantly overweighted. Based on simulation results (Fig.7), in terms of freefloatadjusted market capitalisation, Financials would account for nearly 80% of the HSCEI, whereas it would only constitute around 30% of the China sector proxy. * The China sector proxy is composed of all the Mainland securities in the Hang Seng Composite Index, which is a broadbased market benchmark of the stock market. Fig.5: Share class distribution in terms of market capitalisation HShares Redchips Pchips 100% 19% 18% 90% 17% 17% 22% 28% 29% 29% 29% 35% 34% 80% 40% 40% 70% 37% 60% 45% 40% 42% 32% 31% 60% 34% 34% 50% 31% 30% 27% 28% 40% 30% 20% 37% 46% 39% 41% 40% 40% 37% 37% 34% 36% 33% 32% 10% 21% 0% Fig.6: Share class distribution in terms of market turnover HShares Redchips Pchips 100% 16% 14% 15% 11% 90% 17% 22% 29% 28% 26% 30% 34% 31% 32% 80% 70% 30% 31% 24% 23% 21% 20% 60% 20% 19% 20% 19% 17% 18% 18% 50% 40% 30% 54% 55% 61% 62% 66% 57% 51% 53% 54% 51% 52% 47% 50% 20% 10% 0% Fig.7: Simulated industry distribution in terms of freefloatadjusted market capitalisation 90% 80% Industry distribution in terms of freefloat market capitalisation HSCEI China sector proxy* 70% 60% 50% 40% 30% 20% 10% 0% ENG MAT IND CSG SER TEL UTI FIN P&C IT CGM ENG :Energy SER :Consumer Services P&C :Properties & Construction MAT :Materials TEL :Telecommunications IT :Information Technology IND :Industrials UTI :Utilities CGM :Conglomerates CSG :Consumer Goods FIN :Financials Estimate based on data as at 15 September 2017 Hang Seng Indexes Quarterly 3rd Quarter

14 Index Research Hang Seng China Enterprises Index Evolving alongside the market Adding 10 Redchips and Pchips is sufficient to significantly raise market coverage In view of the structural changes in the market, Hang Seng Indexes has proposed enhancing the HSCEI by expanding the selection universe to include Redchips and Pchips. Following a number of market consultation exercises, the total number of Redchips and Pchips constituents to be included in the index has been set at 10. In addition to reflecting the market consensus, the appropriateness of adding 10 Redchips and Pchips to the index is also supported by various market statistics. Adding 10 Redchips and Pchips to the index will increase the market capitalisation coverage by an estimated 26% to 56%. The marginal benefit of adding more Redchips and Pchips diminishes significantly. For example, if a total of 20 Redchips and Pchips were to be added to the index, the improvement in coverage ratio would only be 3% when compared with the market capitalisation coverage of adding 10. A similar picture emerges for coverage of market turnover. Adding 10 Redchips and Pchips improves the coverage ratio by nearly 20%. Adding a further 10 constituents (for a total of 20) would only increase the ratio by an additional 2%. Fig.8: Estimated market capitalisation coverage Existing Add 10 Redchips/Pchips 26.1% 55.8% 55.2% 58.5% Fig.9: Estimated market turnover coverage Add 10 Redchips/Pchips Add 20 Redchips/Pchips 57.6% 60.0% 59.0% 60.8% Estimate based on 12month average market value as at 30 June 2017 Add 20 Redchips/Pchips Add 30 Redchips/Pchips Add 30 Redchips/Pchips Add 40 Redchips/Pchips 59.6% Add 40 Redchips/Pchips 37.6% Existing Estimate based on 12month aggregate turnover as at 30 June 2017 More reflective of industry distribution of China sector Subsequent to the enhancement, it is also estimated that the industry distribution of the HSCEI would be more representative of the overall China sector. If the above industry distribution simulation exercise is applied to the enhanced HSCEI, it is notable that the deviation from the distribution of the China sector is less significant when compared to Figure 7. Based on the simulation results (Fig.10), Financials would account for less than 50% of the HSCEI subsequent to enhancement, compared with nearly 80% previously. Fig.10: Simulated industry distribution in terms of freefloat market capitalisation after enhancement 90% 80% 70% 60% 50% 40% 30% 20% Industry distribution in terms of freefloat market capitalisation HSCEI_enhanced China sector proxy* 10% 0% ENG MAT IND CSG SER TEL UTI FIN P&C IT CGM ENG :Energy SER :Consumer Services P&C :Properties & Construction MAT :Materials TEL :Telecommunications IT :Information Technology IND :Industrials UTI :Utilities CGM :Conglomerates CSG :Consumer Goods FIN :Financials Estimate based on data as at 15 September Hang Seng Indexes Quarterly 3rd Quarter

15 Index Research Hang Seng China Enterprises Index Evolving alongside the market Additional screening for Redchips and Pchips Fig.11: Additional Eligibility Criteria Additional Eligibility Screenings Listing History Price Volatility Financial Requirements Three years for companies listed through an IPO; or Six years for companies listed through a backdoor listing. The past onemonth, threemonth and 12month historical price volatilities of a potential constituent should not be more than three times the historical price volatility of the HSCEI for the respective periods. The following financial parameters of the company in the past three fiscal years must be greater than zero: Net profit attributable to equity holders of the company Net cash generated from operating activities Cash dividends Since Redchips and Pchips are different from Hshares in nature, it might not be appropriate to simply apply the screening used for Hshares to Redchips and Pchips. More caution should be taken given that the HSCEI is widely used by both retail and institutional investors. In acknowledgement of the need for extra caution, additional eligibility requirements have been introduced. To be eligible for inclusion, Redchips and Pchips must have a listing history of three years or more depending on how they obtained their listing. The price volatilities of Redchips and Pchips are also required to be less than three times the volatility of the HSCEI for three different time periods (one month, three months and 12 months). To be eligible for inclusion, Redchip and Pchip stocks are also required to have recorded positive i) net profit attributable to equity holders of the company, ii) net cash generated from operating activities, and iii) cash dividends for the three most recent fiscal years. Eligible Redchips and Pchips will be screened using data as at end of December 2017 and the 10 selected constituents will remain unchanged throughout the transition period, which is detailed in the next section. Hang Seng Indexes Quarterly 3rd Quarter

16 Index Research Hang Seng China Enterprises Index Evolving alongside the market Transition over five phases Fig.12: Simulated share class distribution after enhancement If 10 Redchip and Pchip constituents are added to the index, it is estimated that they would account for roughly 30% of the weighting (Fig. 12). If all 10 are added at the same time, the market impact as a result of rebalancing would be significant. It has therefore been determined that the transition will take place in five phases (Fig. 13). 30.4% Hshares Redchips/Pchips An inclusion factor will be applied to the weighting of Redchip and Pchip constituents to smooth out the transition and reduce the index turnover. Using the rebalancing in Phase 1 as an example, the procedure is as follows: 69.6% 1. The weightings of the relevant Redchips and Pchips are calculated without using an inclusion factor (the upper chart in Fig. 14). 2. These weightings are multiplied by the inclusion factor (0.2 in this case). Assume the rebalancing was performed on 15 September 2017 Fig.13: 5 Phases for transition and the corresponding inclusion factor 3. Any excess weightings that arise as a result of applying the inclusion factor are redistributed to Hshares with weightings that are less than the cap level in proportion to their freefloatadjusted MV. 4. If the application of the procedure set out in step 3 above results in any constituents with weightings that exceed the cap level, their weightings will be reduced to cap level and the excess weight will be redistributed to the other Hshare constituents with weightings of lower than the cap level. Phase Rebalancing month March 2018 June 2018 September 2018 December 2018 March 2019 Inclusion Factor Fig.14: Illustration of rebalancing in Phase 1 Assume the rebalancing was performed on 15 September % 10% 8% 6% Existing New Red/PChips: To be added New Red/PChips: To be redistributed 4% 2% 0% 12% 10% 8% 6% Existing Redistributed Weighting New Red/PChips: To be added 4% 2% 0% Conclusion In view of the structural changes in the stock market, the coverage of the HSCEI is to be expanded by including Redchips and Pchips in the selection universe. A total of 10 Redchip and Pchip constituents are to be added into HSCEI during the March 2018 rebalancing. This will sufficiently increase the representativeness of the index as regards for the China sector listed in. Additional eligibility criteria are to be applied to Redchip and Pchip constituents as a result of the difference in nature between these types of companies and Hshares. In order to minimise the impact on the market, the transition will be completed over five rebalancings and the 10 Redchip and Pchip constituents will remain unchanged throughout the transition phases. 9 Hang Seng Indexes Quarterly 3rd Quarter

17 Index Products As at 29 Sep 2017 Exchangetraded Fund (ETF) ETF Name Hang Seng Index Tracker Fund of Hang Seng Index ETF Lyxor ETF HSI Reliance ETF Hang BeEs ComStage HSI UCITS China AMC HSI ETF ChinaAMC SHHK Stock Connect Hang Seng Index ETF China Southern HSI ETF Fuh Hwa Hang Seng ETF ishares Core Hang Seng Index ETF Hang Seng China Enterprises Index Hang Seng HShare Index ETF Lyxor ETF China Enterprise HSCEI Samsung KODEX China H ETF ComStage HSCEI UCITS Nikko Listed Index Fund China Hshare Hang Seng China Enterprises E Fund HSCEI ETF Tiger China HShare ETF KB KBSTAR China Hshare H ETF Fubon Hang Seng HShare Index ETF Hang Seng Futures Index Samsung KODEX HSI Futures ETF Hang Seng Futures RMB FX Index Samsung KODEX HSI Futures RMB FX ETF Hang Seng HK 35 Amundi Hang Seng HK 35 Index ETF Hang Seng China (listed) 25 Index Mirae Asset MAPS TIGER China ETF Hang Seng High Dividend Yield Index Mirae Asset Horizons Hang Seng High Dividend Yield ETF Horizons China High Dividend Yield Index ETF Hang Seng China A Industry Top Index Hang Seng China A Industry Top Index ETF Hang Seng Stock Connect SmallCap Index ChinaAMC Hang Seng Stock Connect SmallCap Index ETF Leveraged and Inverse Products (L&I) ETF Name Hang Seng Index ChinaAMC Direxion HSI Daily (1x) Inverse Product ChinaAMC Direxion HSI Daily (2x) Leveraged Product CSOP HSI Daily (1x) Inverse Product CSOP HSI Daily (2x) Leveraged Product Mirae Asset Horizons HSI Daily (1x) Inverse Product Mirae Asset Horizons HSI Daily (2x) Leveraged Product Samsung HSI Daily (1x) Inverse Product Samsung HSI Daily (2x) Leveraged Product E Fund Yuanta HSI Daily (1x) Inverse Product E Fund Yuanta Hang Seng Index Daily (2x) Leveraged Product Hang Seng China Enterprises Index ARIRANG SynthChina H Leverage ETF Samsung KODEX China H Leverage ETF ChinaAMC Direxion HSCEI Daily (1x) Inverse Product ChinaAMC Direxion HSCEI Daily (2x) Leveraged Product CSOP HSCEI Daily (1x) Inverse Product CSOP HSCEI Daily (2x) Leveraged Product Mirae Asset Horizons HSCEI Daily (1x) Inverse Product Mirae Asset Horizons HSCEI Daily (2x) Leveraged Product Samsung HSCEI Daily (1x) Inverse Product Samsung HSCEI Daily (2x) Leveraged Product HSI Short Index Fuh Hwa Daily Hang Seng Inversed ETF HSI Leveraged Index Fuh Hwa Daily Hang Seng Leveraged 2X ETF HSCEI Short Index Simplex China Hshare Bear 1x ETF Fubon Hang Seng HShare Inverse Index ETF HSCEI Leveraged Index Simplex China Hshare Bull 2x ETF Fubon Hang Seng HShare Leveraged Index ETF Exchangetraded Note (ETN) ETN Name Hang Seng Index Psagot HSI ETN Harel Sal HSI ETN Hang Seng China Enterprises Index Index HSCEI ETN KSM HSCEI ETN HSI Leveraged Index Next Notes HSI Leveraged ETN HSI Short Index Next Notes HSI Short ETN HSCEI Short Index TRUE HSCEI Short Index ETN (H) Classification Fund Fund Name Hang Seng Index Huitianfu Hang Seng Index Fund Hang Seng China Enterprises Index Yinhua Hang Seng China Enterprises Index Fund Listed Openended Fund (LOF) Fund Name Hang Seng Index Da Cheng Hang Seng Index Fund Hang Seng China Enterprises Index Harvest Hang Seng China Enterprises Index Securities Investment Fund Hang Seng Composite MidCap & SmallCap Index Da Cheng Hang Seng MidCap & SmallCap Index Fund Hang Seng Composite SmallCap Index E Fund Hang Seng Composite SmallCap Index Fund Hang Seng China (listed) 25 Index Fortune SG Stock Through Hang Seng China 25 Index Fund Hang Seng China Enterprises Smart Index China Southern Hang Seng China Enterprise Prudent Index Fund Mandatory Provident Fund (MPF) Listing Places France, Italy, Germany, Singapore, Switzerland India Germany, UK, Switerzland Shenzhen Shanghai Shanghai Taiwan France, Italy, Germany, Spain, Singapore, UK, Switzerland South Korea Germany, UK, Switerzland Japan Shanghai South Korea South Korea Taiwan South Korea Canada Listing Places South Korea South Korea Taiwan Taiwan Japan Taiwan Japan Taiwan Listing Places Israel Israel Israel Israel Japan Japan South Korea Listing Places Shenzhen Shenzhen Listing Places Shenzhen Shenzhen Shenzhen Shanghai Shenzhen Shenzhen (Sorted by Fund Inception Date) ETF Manager UCITS Fund State Street Global Advisors Asia Limited Hang Seng Investment Management Limited Lyxor International Asset Management Goldman Sachs Asset Management (India) Private Limited Commerz Derivatives Fund Solutions S.A. China Asset Management Co., Ltd. China Asset Management Co., Ltd. China Southern Asset Management Co Ltd Fuh Hwa Securities Investment Trust Company Limited Blackrock Asset Management North Asia Limited Hang Seng Investment Management Limited Lyxor International Asset Management Samsung Investment Trust Management Co. Limited Commerz Derivatives Fund Solutions S.A. Nikko Asset Management Co., Ltd. E Fund Management Co., Ltd. Mirae Asset Global Investments Company Limited KB Asset Management Company Limited Fubon Asset Management Company Limited Samsung Asset Management Co. Ltd Samsung Asset Management Co. Ltd Amundi Limited Mirae Asset Global Investments Mirae Asset Global Investments (HK) Ltd Horizons ETFs Management (Canada) Inc. Hang Seng Investment Management Limited China Asset Management () Limited ETF Manager China Asset Management () Limited China Asset Management () Limited CSOP Asset Management Co., Ltd CSOP Asset Management Co., Ltd Mirae Asset Global Investments (HK) Ltd Mirae Asset Global Investments (HK) Ltd Samsung Asset Management Co. Ltd Samsung Asset Management Co. Ltd E Fund Management () Co., Ltd. E Fund Management () Co., Ltd. Hanwha Asset Management Co. Ltd Samsung Asset Management Co. Ltd China Asset Management () Limited China Asset Management () Limited CSOP Asset Management Co., Ltd CSOP Asset Management Co., Ltd Mirae Asset Global Investments (HK) Ltd Mirae Asset Global Investments (HK) Ltd Samsung Asset Management Co. Ltd Samsung Asset Management Co. Ltd Fuh Hwa Securities Investment Trust Company Limited Fuh Hwa Securities Investment Trust Company Limited Simplex Asset Management Co., Ltd. Fubon Asset Management Company Limited Simplex Asset Management Co., Ltd. Fubon Asset Management Company Limited ETN Manager Psagot Investment House HarelSal Ltd Tachlit Index Sal Ltd KSM Sal Indices Certificates Ltd. Nomura Asset Management Co., Ltd. Nomura Asset Management Co., Ltd. Korea Investment & Securities Co., Ltd Fund Manager China Universal Asset Management Co., Ltd. Yinhua Fund Management Co. Ltd. Fund Manager Da Cheng Fund Management Company Limited Harvest Fund Management Co., Ltd. Da Cheng Fund Management Company Limited E Fund Management Company Limited Fortune SG Asset Management Co., Ltd. China Southern Asset Management Co., Ltd. Sponsor/Trustee Hang Seng Indexes Quarterly 3rd Quarter

18 Index Products As at 29 Sep 2017 China Southern Hang Seng China Enterprise Prudent Index Fund Mandatory Provident Fund (MPF) MPF Name Hang Seng Index BOCIPrudential My Choice Tracking Fund BCT (Pro) Hang Seng Index Tracking Fund BCOM HSI Tracking (CF) Fund BEA Tracker Fund Hang Seng Index Tracking Fund Invesco Hang Seng Index Tracking Fund Principal Hang Seng Index Tracking Fund Fidelity Tracker Fund Manulife MPF Hang Seng Index Tracking Fund Hang Seng China Enterprises Index Hang Seng HShare Index Tracking Fund BEA China Tracker Fund Index Fund Fund Name Hang Seng Index Voya Hang Seng Index Portfolio Hang Seng Index Fund Hang Seng Index Fund Hang Seng Index Leveraged 150 Fund Hang Seng China Enterprises Index MiraeAsset Indexro China H Leverage Master Fund MiraeAsset MAPS China H Index Equity Trust I Hang Seng China HShare Index Leveraged 150 Fund KB China H Equity Index Securities Fund Hang Seng China A Industry Top Index HSBC Jintrust Hang Seng China A Industry Top Index Fund Hang Seng Composite MidCap Index Hang Seng HK MidCap Index Fund Hang Seng China 50 Index Hang Seng China 50 Index Fund Hang Seng Corporate Sustainability Index Hang Seng Corporate Sustainability Index Fund Shenzhen Offering Places USA Japan South Korea South Korea South Korea PRC China Southern Asset Management Co., Ltd. Sponsor/Trustee BOCIPrudential Trustee Limited Bank Consortium Trust Company Limited Bank of Communications Trustee Limited Bank of East Asia (Trustees) Limited HSBC Provident Fund Trustee () Limited Invesco Limited Principal Trust Company (Asia) Limited FIL Investment Management () Limited Manulife Provident Funds Trust Company Limited HSBC Provident Fund Trustee () Limited Bank of East Asia (Trustees) Limited Fund Manager ING Investment Management Co. and ING Investments, LLC Sumitomo Mitsui Asset Management Company Limited Hang Seng Investment Management Limited Hang Seng Investment Management Limited Mirae Asset Global Investments Co., Ltd. Mirae Asset Global Investments Co., Ltd. Hang Seng Investment Management Limited KB Asset Management Co., Ltd HSBC JinTrust Fund Management Company Limited Hang Seng Investment Management Limited Hang Seng Investment Management Limited Hang Seng Investment Management Limited (Sorted by Fund Inception Date) Futures & Options Indexes Futures Hang Seng Index Hang Seng China Enterprises Index Daily Average Volume* Jul Aug Sep 127, , , , , , , ,673 94, ,217 Open Interest 2017 Jul Aug Sep 167, , , , , , , ,904 98, ,984 Dividend Point Indexes # Hang Seng Index ,822 11,122 11,422 4,621 2,581 Dividend Point Indexes # Hang Seng China Enterprises Index 501 2,411 1,196 2, , , , ,112 75,426 HSI Volatility Index^ Options Hang Seng Index Hang Seng China Enterprises Index 42,594 65,619 49,671 79,359 41,035 84, ,025 79, ,286 62, ,680 2,831, ,165 3,002, ,764 2,930, ,082 2,078, ,528 1,628,887 Source: Exchanges and Clearing Ltd. * Include both Standard and Mini futures/options. 1 Standard = 5 Mini # Dividend Point Indexes futures was launched on 1 Nov 2010 ^ VHSI Futures was launched on 20 Feb 2012 Warrants & Callable Bull/Bear Contracts ("CBBCs") Indexes Warrants Hang Seng Index linked Hang Seng China Enterprises Index linked CBBCs Hang Seng Index linked Hang Seng China Enterprises Index linked Source: Exchanges and Clearing Ltd. Daily Average Turnover (HKD 'Mn) Jul Aug Sep 1, , , , , , ,375 1,392 6, Hang Seng Indexes Quarterly 3rd Quarter

19 Hang Seng Indexes Quarterly 3rd Quarter Change (%) Annualised 1Year Annualised Dividend Return (%) Volatility Yield PE Ratio Level 3Month YTD 1Year 3Year 5Year Year 5Year (%) (%) (Times) HONG KONGLISTED Hang Seng Index Subindexes Hang Seng Finance Subindex Hang Seng Utilities Subindex Hang Seng Properties Subindex Hang Seng Commerce & Industry Subindex Hang Seng Composite Index Hang Seng Composite Industry Indexes Energy Materials Industrials Consumer Goods Consumer Services Telecommunications Utilities Financials Properties & Construction Information Technology Conglomerates Hang Seng Composite Size Indexes Hang Seng Composite LargeCap Index Hang Seng Composite LargeCap & MidCap Index^ Hang Seng Composite MidCap Index Hang Seng Composite MidCap & SmallCap Index^ Hang Seng Composite SmallCap Index Hang Seng Foreign Companies Composite Index Hang Seng Global Composite Index Hang Seng Corporate Sustainability Benchmark Index Hang Seng China Enterprises Index Hang Seng ChinaAffiliated Corporations Index Hang Seng China HFinancials Index Hang Seng China (listed) 100 Index Hang Seng China (listed) 25 Index Hang Seng HK 35 Hang Seng REIT Index Hang Seng Corporate Sustainability Index Hang Seng High Dividend Yield Index Hang Seng Low Volatility Index Hang Seng High Beta Index 27, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , (1.77) (3.55) (0.28) (11.52) (30.37) (2.61) (11.41) (1.43) (5.26) (2.34) (37.27) (7.85) (0.88) (2.11) (3.06) 2.89 (0.89) (7.59) (6.46) 3.62 (5.98) (7.44) (3.06) (1.84) (15.44) 0.44 (0.46) (4.26) (5.19) (8.23) (1.31) 0.75 (2.75) (11.45) (5.02) (1.29) (0.78) (2.98) (1.56) 0.05 (11.71) (7.16) (9.81) (6.32) (2.09) (5.29) (7.52) (31.33) (18.68) (5.74) (10.29) (23.92) (5.12) (8.14) (10.01) (2.57) (8.24) (7.50) (4.30) (5.05) (7.40) (29.05) (7.62) (5.76) (19.39) (6.85) (14.89) (10.61) (11.89) (4.98) 0.69 (3.58) (4.75) (6.88) (15.09) (5.74) 0.20 (17.34) (1.10) 4.97 (11.09) (30.50) (5.62) (0.14) (2.13) (7.67) (4.48) (4.47) (3.23) (11.37) (0.88) (3.96) (0.48) (1.78) (0.79) (8.90) (1.62) ^ The Hang Seng Composite LargeCap & MidCap Index aims at reflecting the overall performance of LargeCap & MidCap sectors and the Hang Seng Composite MidCap & SmallCap Index aims at reflecting the overall performance of MidCap & SmallCap sectors. As at 29 Sep 2017 Index Performance

20 13 Hang Seng Indexes Quarterly 3rd Quarter 2017 Hang Seng Sector Index Series Hang Seng IT Hardware Index Hang Seng Mainland Banks Index Hang Seng Mainland Healthcare Index Hang Seng Mainland Oil & Gas Index Hang Seng Mainland Properties Index Hang Seng Software & Services Index Hang Seng Consumer Goods & Services Index Hang Seng Healthcare Index Hang Seng Internet & Information Technology Index Hang Seng Stock Connect Index Hang Seng Stock Connect MidCap & SmallCap Index Hang Seng Stock Connect SmallCap Index Hang Seng SCHK Mainland China Banks Index Hang Seng SCHK High Dividend Low Volatility Index HSI Volatility Index Change (%) Annualised Return (%) Level 3Month YTD 1Year 3Year 5Year Year 5Year 3, (7.47) (2.14) , (17.53) , (6.87) , (36.55) (37.50) 6.28 (25.39) (32.59) (14.07) (8.97) 6, (13.15) (7.41) , (5.80) (19.29) , (1.49) (19.05) (22.54) , (4.52) (11.06) (3.21) (1.53) , (2.13) , (0.63) (7.36) 3, (5.45) (4.93) 2, (9.78) (8.96) 2, (0.27) (13.79) 4, (10.51) (17.05) (29.84) (30.09) (8.31) (8.65) (11.25) (1.72) 1Year Annualised Dividend Volatility Yield (%) (%) PE Ratio (Times) As at 29 Sep 2017 Index Performance Hang Seng Risk Adjusted Index Series Hang Seng Risk Adjusted Index HSI 20% Hang Seng Risk Adjusted Index HSCEI 25% 71, , (0.67) (5.30) (16.78) Hang Seng Short & Leveraged Index Series Short Indexes HSI Short Index HSCEI Short Index Hang Seng HFin Short Index HSI 2x Short Index HSCEI 2x Short Index Hang Seng HFin 2x Short Index 5, , (8.25) (7.38) (7.29) (16.19) (14.76) (14.74) (23.64) (18.39) (18.66) (42.36) (34.51) (35.12) (19.78) (17.41) (17.32) (36.73) (33.52) (33.54) (32.50) (28.30) (39.25) (58.97) (56.66) (69.46) (45.58) (41.85) (53.99) (74.61) (73.81) (84.22) (7.67) (6.87) (5.02) (18.08) (18.18) (14.81) (0.52) (5.55) (0.59) (7.27) (16.72) (23.41) (16.03) (33.41) (44.20) (12.28) (10.50) (15.31) (25.69) (24.32) (32.66) (11.46) (10.28) (14.38) (23.98) (23.50) (30.88) Leveraged Indexes HSI Leveraged Index HSCEI Leveraged Index Hang Seng HFin Leveraged Index Hang Seng Equal Weighted Index Hang Seng China Enterprises Equal Weighted Index 21, , , , , (5.57) (4.49) (3.17) (10.84) (14.87) (3.94) (4.74) (17.79) (39.97) (33.87) (10.59) (20.15) (1.89) (0.91) Hang Seng Futures Index Series Hang Seng Futures Index Hang Seng Futures RMB FX Index Hang Seng China Enterprises Futures Index Hang Seng China Enterprises Futures RMB FX Index 32, , , , (2.45) (0.10) (5.69) (5.84) (11.35) (17.99) (22.80)

21 Hang Seng Indexes Quarterly 3rd Quarter CROSS MARKETLISTED Hang Seng China 50 Index Hang Seng Stock Connect China AH Premium Index Hang Seng (Mainland and HK) Corporate Sustainability Index Hang Seng Stock Connect China AH (A+H) Index Hang Seng Stock Connect China AH (A) Index Hang Seng Stock Connect China AH (H) Index Hang Seng Stock Connect China AH Smart Index Hang Seng CSI Shanghai AH Smart Index Hang Seng China Enterprise Smart Index Hang Seng Shenzhen Index Series Hang Seng Shenzhen Index Hang Seng Shenzhen Financials Index Hang Seng Shenzhen Consumption Index Hang Seng Shenzhen Real Estate Index Hang Seng Shenzhen Information Technology Index Hang Seng Shenzhen Infrastructure & Transportation Index MAINLANDLISTED Hang Seng China A IndustryTop Index Hang Seng China A Top 100 Index Hang Seng (China A) Corporate Sustainability Benchmark Index Hang Seng (China A) Corporate Sustainability Index BOND INDEXES Hang Seng ibond Index Series Hang Seng ibond Composite Total Return Index Hang Seng ibond 1808 Total Return Index Hang Seng ibond 1906 Total Return Index Hang Seng Markit iboxx Offshore RMB Bond Index family Hang Seng Markit iboxx Offshore RMB Bond Overall Index Hang Seng Markit iboxx Offshore RMB Corporates Bond Index Hang Seng Markit iboxx Offshore RMB China Government Bond Index Hang Seng Markit iboxx Offshore RMB NonSovereigns Bond Index Hang Seng Markit iboxx Offshore RMB Large Cap Bond Index Hang Seng Markit iboxx Offshore RMB High Yield Bond Index Hang Seng Markit iboxx Offshore RMB Investment Grade Bond Index OTHER INDEXES Dividend Point Index Series HSI Dividend Point Index HSCEI Dividend Point Index Change (%) Annualised Return (%) Level 3Month YTD 1Year 3Year 5Year Year 5Year 8, , , , , , , , , , , , , , , , , , (3.74) (12.45) (4.45) (8.22) (7.69) (1.34) (0.71) 7.07 (2.04) (0.18) (3.41) 1.45 (3.58) (10.88) (2.13) (4.75) (4.89) (5.43) 1.17 (0.41) (9.21) 8.03 (5.21) (12.22) (3.71) (17.03) (13.47) (10.95) (16.16) (2.92) (1.08) 5.55 (1.63) (12.60) Year Annualised Dividend Volatility (%) Yield (%) PE Ratio (Times) As at 29 Sep 2017 Index Performance

22 Index Rankings Hang Seng Family of Indexes As at 29 Sep 2017 Hang Seng Composite Index Size Indexes 3Month Index Performance (%) 1Year Index Performance (%) MidCap MidCap & SmallCap LargeCap & MidCap Hang Seng Composite Index LargeCap SmallCap Industry Indexes 3Month Index Performance (%) 1Year Index Performance (%) Materials Information Technology Industrials Properties & Construction Consumer Goods Hang Seng Composite Index Consumer Services Energy Financials Conglomerates Utilities Telecommunications Hang Seng Indexes Quarterly 3rd Quarter