The Hang Seng Tech Index, which tracks the 30 biggest companies with listings in Hong Kong on Monday crashed down more than 1% in its debut.
The new Nasdaq-like benchmark includes firms such as tech giants Tencent Holdings Ltd., (HKEX: 00700) Alibaba Group Holding Ltd., (NYSE: BABA; HKEX: 09988) Meituan Dianping (HKEX: 03690) and Xiaomi Corp. (HKEX: 01810). Shares of the food delivery firm Meituan Dianping and the Smartphone manufacturer Xiaomi both plummeted 3% respectively in their debuts on the index. However, based on trading prices in 2020, Alibaba, Meituan Dianping, and Xiaomi would have returned 44% for investors on the tech benchmark compared with a loss of 13% for Hong Kong’s main benchmark the Hang Seng Index.
"The index launched on a day when investors decided to sell some of the constituents and take some profit," Hao Hong, the head of research at BOCOM International in Hong Kong, said.
He added, “The tepid open notwithstanding, it is a landmark development for Hong Kong and investors. The importance of the index will only increase."
The move follows the Shanghai Stock Exchange STAR Market launch of an index last week, known as the “STAR 50 Index”. Shanghai’s new index compromises of 50 top companies in the Star Market, which also focuses on Chinese tech firms.
As for Hong Kong, the new index is helping bridge a gap between the stocks on the main benchmark filled with banks and insurers versus a technology sector that includes emerging firms in the city’s market.
“There are too many laggards in the Hang Seng Index,” Castor Pang, the head of research at Core Pacific-Yamaichi International Hong Kong, said.
He continued, “With overseas-listed Chinese firms deciding to list closer-to-home, the Hong Kong market falls short in terms of having a representative index for these stocks. This new index serves to fill this gap and drive capital flows.”
It also wasn’t a great day for the Hang Seng Index, as it was sent 102 points lower at the close of trading Monday.