Xinyi Solar, BYD Added to Hong Kong Stock Gauge in Overhaul

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Xinyi Solar Holdings Ltd, BYD Co. Ltd. and Country Garden Services Holdings rallied after being added to Hong Kong’s stock benchmark in the first step of its biggest-ever overhaul.

That will boost the number of firms in the Hang Seng Index to 58 companies from 55, Hang Seng Indexes Co. announced late Friday in its quarterly review. No companies were removed, and the changes are effective June 7. All three firms rose by at least 5.3% on Monday morning.

The index compiler is also lowering the weighting of some of the biggest stocks to as much as 8%. As of Friday’s close, AIA Group Ltd., Tencent Holdings Ltd. and HSBC Holdings Plc were all above that threshold, according to Bloomberg data.

Xinyi Solar Leads HSI New Joiners Up; JD Health Drops After Miss

The changes are part of a wide-ranging revamp the index compiler unveiled earlier this year to diversify and broaden the benchmark, a move that may impact tens of billions of dollars in pension-fund assets and exchange-traded funds tracking the HSI. Measures include boosting the total number of constituents to 80 by the middle of next year and broadening representation of companies from different sectors.

Analysts were expecting the first batch of new members to come from industries that are currently under-represented, such as consumer and health care sectors. About $16 billion worth of exchange traded funds track the HSI, according to data compiled by Bloomberg.

The additions - a solar glass maker, an auto maker and a property manager - were smaller and less wide ranging than expected, analysts say pointing to the lack of health-care firms. That may be more related to JD Health International Inc., which was seen as a top contender, being unprofitable rather than a view on the sector, said CGS-CIMB analyst Chi Man Wong. The online health platform dropped 6.3% in Hong Kong.

“The compiler could be a bit concerned about adding companies without any net profit,” he said. “I think there is chance for health-care firms to join in the next round, which is taking place in August. But it will really depends on how health-care sector do in the second quarter, and hopefully their market cap grows during this period.”

Hong Kong’s stock market has delivered one of the worst equity performances globally since its February high, with technology stocks sharply underperforming the benchmark amid a global selloff.

©2021 Bloomberg L.P.

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