Hong Kong's Hang Seng Index Replaces Lenovo With CSPC Pharma

(Bloomberg) -- The outlook for Lenovo Group Ltd. shareholders is looking grimmer after the stock was dropped from Hong Kong’s benchmark stock gauge.

The Beijing-based company will be replaced by CSPC Pharmaceutical Group Ltd., as part of Hang Seng Indexes Co.’s quarterly review. The re-balancing will take effect on June 4, the index compiler said in a statement on Friday.

Lenovo has plunged 57 percent since it was added to the gauge in 2013 to lose $5.9 billion in value. The company has struggled to revive its business as it lost market share in mobile. Removal from the gauge could spur more outflows from Lenovo, as at least $107 billion worth of passive funds track the Hang Seng Index, data compiled by Bloomberg show.

"While we respect the review results of Hang Seng Indexes, we are singularly focused on our ongoing transformation to drive sustainable long-term returns for our shareholders," Lenovo said in an emailed statement.

China’s signals of further support for the nation’s healthcare industry contributed to CSPC Pharma’s inclusion in the Hang Seng Index. Shares of the Chinese drugmaker have gained 29 percent this year, among the best-performing healthcare companies in Asia. The surge, which took its market value to $16 billion, also came as the FDA in recent months approved CSPC Pharma’s products treating tumors and amyotrophic lateral sclerosis.

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