Alibaba and Xiaomi Get Into Hong Kong’s Benchmark Index

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Alibaba Group Holding Ltd. will be included in Hong Kong’s Hang Seng in one of the biggest revamps in the benchmark index’s 50-year history.

Xiaomi Corp. will also be joining 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 shares and secondary listings.

The move could affect tens of billions of dollars in pension fund assets and exchange-traded funds that track the index. Sino Land Co., Want Want China Holdings Ltd and China Shenhua Energy Co. were forced out of the 50-member gauge.

The changes will be effective Sept. 7.

Alibaba and Xiaomi Get Into Hong Kong’s Benchmark Index

The Hang Seng Index is down 11% for the year, compared with the 15% gain for China’s CSI 300 Index and the Nasdaq Composite’s 23% rise.

Alibaba’s inclusion builds on the trend of China’s technology giants gaining more clout in Hong Kong markets -- so much that the compiler recently launched a new measure focused on tech.

“The inevitable trend is for Hong Kong’s equity benchmark to lose more local features and represent more of the Chinese economy,” according to Jackson Wong, asset management director at Amber Hill Capital Ltd, who spoke before the announcement. “Adding these companies will help it better reflect changes in the city’s equity market.”

As of Friday’s trading close, at least 26 firms out the 50 Hang Seng members generate the majority of their revenue from the mainland.

More listings of mainland Chinese firms are in the pipeline, such as by Alibaba founder Jack Ma’s Ant Group, after debuts by NetEase Inc. and JD.com Inc. Listing closer to home has become more attractive as tensions between Washington and Beijing threaten to curtail China Inc.’s access to U.S. capital markets.

Dual-class and secondary listings will each be subject to a 5% weighting cap, compared with a maximum 10% limit for others. Dual-class shares were long blocked from listing in Hong Kong due to concern over unequal voting rights until Xiaomi’s debut in 2018.

©2020 Bloomberg L.P.

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