Hang Seng Indexes, the city’s leading index compiler, announced Monday the creation of a new benchmark that will track the 30 largest technology companies trading in Hong Kong. The Hang Seng TECH Index is expected to launch next week.
Hong Kong’s role as a global financial center has been shaken in recent months by tensions between the United States and China, which have escalated as Beijing moves to tighten its grip on the city. Some have criticized the general national security law that China imposed on the city as a mine for the political and legal liberties that have existed since Britain handed the former colony over to China in 1997.
However, the technology index suggests that Hong Kong is seeking to shore up its position as the geopolitical consequences spread.
Recently, the city has become increasingly attractive to Chinese companies who fear for their business prospects in the United States. Alibaba (SLIME), NetEase (NTES) and JD.com (JD) – all of whom trade in New York – have had secondary listings in Hong Kong in recent months. And Ant Group, the company behind China’s mobile payments business Alipay, announced Monday that it has chosen Hong Kong and Shanghai for its initial public offering.
Some of China’s biggest tech champions, like Alibaba, Tencent (TCEHY), Meituan Dianping and Xiaomi will be included in the new technology index. They will have a combined weight of more than 33%.
“The technology sector has become increasingly important to the Hong Kong market,” said Daniel Wong, director and head of research and analysis at HSI. “We hope the move will help attract more tech companies to go public in Hong Kong.”
The boom in China’s tech sector in Hong Kong is also unlikely to end with the creation of this new index. Starting next month, more technology stocks could also begin to appear in the Hang Seng Index (HSI), the main landmark of the city. The index compiler changed the rules in May to allow companies that chose the city for their secondary listing to appear in the index. Market support for change was “overwhelming,” Hang Seng Indexes said at the time.
“The Hong Kong stock market is becoming more technological and that is good for its status as an international financial center,” said Kenny Tang, co-founder and CEO of Royston Securities, based in Hong Kong.
The 51-year-old Hang Seng Index is dominated by financial conglomerates and local property developers, including HSBC (HBCYF), CK Hutchison (CKHUY) and Properties Sun Hung Kai (SUHJF). Only three of its 50 components are technology companies.
But the influx of Chinese tech companies in recent months has dominated commerce. Tencent, Alibaba and Meituan, for example, were the most quoted shares in the city last month, accounting for more than 20% of total turnover. Only Tencent is currently listed in the city’s benchmark.
“The arrival of Chinese technology companies in Hong Kong will fundamentally transform the city’s stock market,” said Tang.
Other analysts have noted that Hong Kong’s role as a global business hub has evolved as China takes greater control of the semi-autonomous region. Brock Silvers, chief investment officer at Adamas Asset Management, told CNN Business last week that the city could find “new relevance” as a center for Chinese finance.
Investors seem to like the new direction. Alibaba’s shares have risen more than 35% since it started trading in Hong Kong last November. JD.com and NetEase, meanwhile, are up 7% and 15%, respectively, since trading last month.
More companies could consider Hong Kong listings. According to data provider Refinitiv, more than 30 Chinese companies listed in the US qualify for a secondary listing in Hong Kong, including Pinduoduo and Baidu.
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