Hong Kong's HSI Takes Another Step in Opening Up Strategy

Hang Seng Indexes posted an address to the public on whether companies with weighted voting rights and secondary listings should be included in the stock benchmark.
Anna VodJan 13,2020,23:20

Hong Kong’s benchmark stock index HSI may this year roll out the red carpet for giants like Alibaba Group Holding Ltd. (NYSE: BABA; HKEX: 9988).

Hang Seng Indexes Co. Ltd., which on Monday ended 316.74 points higher in Hong Kong, at 28,954.94, is consulting with the public on whether to include companies with dual-class shares, also known as weighted voting rights (WVR) and those with secondary listings.

In a statement today, HSI said that about 60% of Hong Kong-listed companies derive more than 50% of their revenue from the Mainland, and they account for about 70% and 80% of the market in terms of market capitalization and trading, respectively.

The stock-market index also said it aims to evolve together with the market developments and the needs of HSI stakeholders. In its address to the public, Hang Seng wrote: “From the perspective of market representation, it seems inappropriate to exclude these large-cap companies from key benchmark indexes.”

The company continued, “On the other hand, opponents have raised concerns about the unequal voting right structure of WVRs, which might disadvantage general shareholders given the superior voting rights of certain ‘minority’ shareholders.”

The move marked yet another sign of relaxing procedures of the Stock Exchange of Hong Kong as it competes with global markets in luring innovators to its doorsteps and struggles against the slowed economy. The anti-Communist protests continue to make news and the South China Morning Post even provided a trip-planner guide for getting around the city.

Naturally, the opening-up of the stock exchange began well before the uprisings. In 2018, the HKEX allowed listings for pre-profit companies, attracting a slew of biotechs including U.S.-listed BeiGene Ltd. (Nasdaq: BGNE; HKEX: 6160), Ascletis Pharma Inc. (HKEX: 1672) and Shanghai Junshi Biosciences Co. Ltd. (HKEX: 1877).

In addition, the market’s opening to the flotations of dual-class share companies led the IPO of Xiaomi Corp. (HKEX: 1810) in July 2018. Meituan Dianping (HKEX: 3690) followed in September 2018 and, more recently, Alibaba celebrated its “homecoming” in November 2019.

The index compiler said that it expects more Greater China companies listed overseas will come to the Hong Kong exchange for a secondary offering.

The consultation period is scheduled to end on March 13 and the results to be announced in May.

Earlier this month, reports surfaced that Chinese search engine Baidu Inc. (Nasdaq: BIDU), Asia’s largest booking platform Trip.com Group Ltd. (Nasdaq: TCOM) and tech giant NetEase Inc. (Nasdaq: NTES) are considering a secondary listing in Hong Kong.