HONG KONG: Ping An Insurance (Group) will be included in the Hang Seng Index (HSI), according to the compiler of Hong Kong's benchmark index.

The move pushes the number of the benchmark's members to 39. The average market value coverage ratio of the index will increase to 66.2 percent from 65.6 percent.

Ping An, which has a market capitalization of roughly 110 billion yuan, is the second mainland insurer to join the index following China Life. The company successfully listed on the A-share market in March.

Ping An reported a net profit of 3.96 billion yuan in the first quarter, a 66 percent year-on-year increase.

Company shares closed at HK$44.45 on Friday, down HK$1.3.

Pedestrians pass a Ping An billboard in Beijing . The mainland insurer was included in Hong Kong's Hang Seng Index on Friday. Wu Changqing

Market watchers had expected China Overseas, Chalco and China Merchants Bank to join the index along with Ping An, said Patrcik Yiu, associate director of CASH Asset Management.

But the insurer was added alone to reduce short-term fluctuations, Yiu said.

"Adding several State-owned companies at one-time would sharply slash the weighting of China Mobile and lead to increased volatility on the index," he said.

The weighting of the index's two largest-cap members - HSBC Holdings and China Mobile is expected to decrease to 15 percent by September.

Yiu said China Overseas will likely be the next State-owned addition to the index.

The Hang Seng Industry Classification System (HSICS), run by HIS Services Ltd, organizes stocks into 11 industries and 28 sectors and undertakes an annual review of the system.

Due to an increasing number of mainland companies listed on the Hong Kong exchange, HSI decided to raise the number of constituents to maximum 50 and weigh down the ratio of heavyweight stocks such as China Mobile and HSBC Holdings.

H-share giants including China Life, the Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Sinopec Corp have already joined the index.

The weightings of HSBC and China Mobile were lowered in March to 20 percent and 16.34 percent respectively, down from 22.46 percent and 21.32 percent.

Vincent Kwan, HSI Services' director and general manager, has said HSI may compile an index to mirror the performance of A and H shares .

"We don't see any technical difficulty in the issue, but we haven't finalized the timeframe yet."

(China Daily 05/12/2007 page10)

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