Two H-share companies, ICBC (1398) and China Life (2628), will join the Hang Seng Index (HSI) on March 12, 2007, taking the number of constituents to 38, HSI Services Limited said Friday.

HSI Service Limited announced the results of its review of the Hang Seng Family of Index for the period ended December 2006. According to the announcement, the weighting of China Life, the largest insurance company of the Chinese mainland, will be 3.47 percent and the ICBC, China's largest bank, 3.06 percent.

Meanwhile, the weighting of HSBC Holdings (5), the largest stock by market capitalization, will be down from 22.46 percent to 20.00 percent. The weighting of China Mobile (941), the second largest stock and also the country's largest communication operator, will move down from 21.32 percent to 16.34 percent.

After the adjustment, HSI will include five H-share companies -- China Life, ICBC, China Construction Bank (939), Bank of China (23) and Sinopec Corp (386), with a total weighting of 13.6 percent, up from the previous 5 percent.

The announcement said the change in the HSI compilation methodology will take place after market close on March 9. Assuming the constituent changes had been made, the average market value coverage ratio for the 12 months ended December 2006 would have risen to 66.7 percent from 62.7 percent.

The market has long expected that the ICBC and China Life will join the HSI. The shares of the two companies kept growing in the past two days. On Friday, the ICBC closed down 0.43 percent at 4. 68 HK dollars and China Life lost 0.83 percent to 23.90 HK dollars because of profit-taking.

On the other hand, the HSBC once falling below 140 HK dollars benchmark during the trading, closed 0.28 percent lower to 140.2 HK dollars. And China Mobile closed 0.84 percent lower to 76.40 HK dollars.

Analysts said the constituent changes will not impose a great impact on the market as the results of the review are largely within the expectation. But they believed that the share of HSBC will drop further because of its bad-debts warning plus the decreasing weighting of the HSI.

They also agreed that since the number of HSI constituents will continue to increase gradually to a maximum of 50, as the review report has announced, more and more Chinese mainland enterprises will become HSI members finally. Petro China (857), Bankcomm (3323) and Ping An Insurance (2318) are very likely to join HSI family after they are listed on the A-share market.

HSI Service also announced that five companies will join the H- share Index and one constituent will be removed, increasing the number of constituents from 37 to 41.

The five companies are China Comservice (552), ICBC, China Comm Cons (1800), China Coal (1898) and CM Bank (3968). The company off the list is Huadian Power (1071).

There is no change to the constituents of the H-Financial Index, HSI Service said.

Source: Xinhua