Hong Kong Index Firm Lifts Weighting Cap for Dual-Class Shares

(Bloomberg) -- Hong Kong’s index compiler is scrapping a weighting limit for dual-class shares on some of its gauges, in a move seen as paving the way for more tech stocks to eventually join the benchmark.

Hang Seng Indexes Co. said in a statement on Friday that it is removing a 10% cap on weighted voting rights companies for the Hang Seng Composite Index and other gauges. The change takes effect when an index review is done in August, it said.

The move will allow the HSCI to include more dual-share companies as an increasing number are expected to list in the city, the next being JD.com Inc., said Chi Man Wong, an analyst with China Galaxy International Financial Holdings.

“The HSCI is a pool of companies that can enter the Hang Seng Index in the future,” Wong said. “They want to remove all the barriers for these tech firms to enter the HSCI first so they can potentially join the Hang Seng Index in the future.”

The index compiler decided last month to include dual-class shares and secondary listings on the benchmark, with each stock subject to a 5% weighting cap. That shift will affect about $30 billion in pension fund assets and exchange-traded funds that track the benchmark.

Alibaba Group Holding Ltd., Meituan Dianping and Xiaomi Corp. are among the candidates for inclusion.

©2020 Bloomberg L.P.

With assistance from Bloomberg