After all the changes, the Hang Seng A-share Grid Equipment Index has been upgraded.
Today, Hang Seng Indexes Company released a revision announcement for one of its indices, which caught my attention. This index is the Hang Seng A-Share Grid Equipment Index.
This index was previously called the Hang Seng A-Share Ultra-High Voltage and Grid Equipment Index, but it was renamed to its current name, the Hang Seng A-Share Grid Equipment Index, in April 2023.
I took a look at the latest revision, which mainly involves an adjustment to the number of constituent stocks, reducing the current 100 constituents to 50, which means the concentration of the index will significantly increase.
Currently, the main competitor of the Hang Seng A-Share Grid Equipment Index is the CSI Grid Equipment Index, which has 80 constituents.
The main ETF tracking this index is ChinaAMC's Grid Equipment ETF (159326).
What's interesting is that the Hang Seng A-Share Grid Equipment Index actually increased its constituents from 50 to 100 in 2022, but it seems that the excessive dispersion led to a lack of sharpness in the index, so the latest revision reduced it back to 50.
From the industry breakdown of the removed constituents, I took a quick glance and found that most were previously related to resource sectors, such as copper and aluminum companies. It's not that these companies are completely unrelated to grid equipment, but they are closer to upstream raw materials. The real grid equipment should be closer to mid-to-downstream finished products, and this rebalancing is moving towards concentrating on mid-to-downstream grid equipment products.
Overall, I believe the Hang Seng A-Share Grid Equipment Index will have better sharpness and purity after this adjustment. The ETF currently tracking this index is Guotai's Grid ETF (561380), which also has a feeder fund.
I noticed that the quantitative index-enhanced investment advisory portfolio I follow specifically increased its allocation to grid equipment in the November rebalancing, using Guotai's feeder fund for the Hang Seng A-Share Grid Equipment ETF.
The underlying logic here is mainly the massive demand for energy and grid equipment under the AI wave, which I'll elaborate on in detail when I have time.
(Not for investment purposes)
$Guotai Hang Seng China A Power Grid Equipment ETF(561380.SH) $ChinaAMC CSI Grid Equipment Thematic ETF(159326.SZ)
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