Index Compiler Urges Inclusion of Chinese Big Tech
Hong Kong’s Hang Seng Indexes is urging for approval to its recently made proposal to include Chinese tech giants in the local benchmark.
The proposal made earlier this month if approved, would allow Hang Seng Index – the most referenced benchmark for the local stock market – to include companies with weighted voting rights, such as Chinese smartphone maker Xiaomi, or those with secondary listings such as internet giant Alibaba. Considerations were also made to limit the weighting of the financial sector in the index.
«The Hang Seng Index needs to track the performance of the biggest and the most liquid stocks of the Hong Kong market,» according to an «SCMP» report, quoting Hang Seng Indexes CEO Vincent Kwan.
«If these largest technology giants are the most traded stocks here, but then they are excluded from the Hang Seng Index, it will reduce the role of the Hang Seng Index as a benchmark of the market. This is why we want to make a change.»
Major Constituents
Despite valid concerns about reform, Chinese tech companies have undoubtedly played a large role as a key contributor to trading activity and the growth of the Hong Kong equity market. Currently, Alibaba’s market cap totals over $600 billion, or about 12 percent of Hong Kong’s total market cap. Alongside Xiaomi and Meituan Dianping, the three technology firms regularly occupy the top ranks amongst the most frequently traded names.
The proposal was made earlier this month and will now await public feedback until mid-March before the results are announced in May. If successful, Kwan called the revamp potentially the most important one for the index since the inclusion of H-shares in 2006.
