(Bloomberg) – Alibaba Group Holding Ltd. will be included in Hong Kong’s Hang Seng in one of the biggest upgrades in the benchmark index’s 50-year history.
Xiaomi Corp. will also participate in the index, as will Wuxi Biologics Cayman Inc., according to Hang Seng Indexes Co. on Friday, as it unveiled the first major changes since the compiler began allowing dual-class and secondary ad sharing.
The move could affect tens of billions of dollars in pension funds and funds traded through exchanges that follow the index. Sino Land Co., Want Want China Holdings Ltd and China Shenhua Energy Co. were forced out of the 50-member yard.
The changes will be September 7th.
The Hang Seng index is down 11% for the year, compared to the 15% gain for China’s CSI 300 index and the Nasdaq Composite’s 23% rise.
The inclusion of Alibaba builds on the trend of China’s tech giants gaining more traction in Hong Kong’s markets – so much so that the compiler recently launched a new tech-focused measure.
“The inevitable trend is for Hong Kong’s equity benchmark to lose more local features and represent more of the Chinese economy,” said Jackson Wong, director of asset management at Amber Hill Capital Ltd, speaking before the announcement. . “Adding these companies will help it to better reflect changes in the city’s market.”
Since Friday’s trade, at least 26 companies out of 50 Hang Seng members have generated the majority of their mainland revenue.
More ads from Chinese companies on the mainland are in the pipeline, as per Alibaba founder Jack Ma’s Ant Group, following debuts by NetEase Inc. and JD.com Inc. Listing closer to home has become more attractive as tensions between Washington and Beijing threaten to limit China Inc.’s access to U.S. capital markets.
Dual-class and secondary ads will each be subject to a 5% weight cap, compared to a maximum limit of 10% for others. Dual-class parts were long blocked from being mentioned in Hong Kong due to concerns about unequal voting rights until Xiaomi’s debut in 2018.
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