HSI compiler proposes allowing foreign companies to become blue chips, buoying efforts to attract more international listings
- Move would allow foreign companies that can match capitalisation and turnover requirements to become a constituent stock of HSI
- Proposal is in line with ‘Hong Kong’s position as an international financial centre’ says chief index officer at the Hang Seng Indexes Company
Foreign companies with a primary listing status in Hong Kong will qualify to become blue chips on the benchmark Hang Seng Index under new proposals, in a move analysts say will attract more international companies to list in the city.
Index compiler Hang Seng Indexes unveiled proposals on Wednesday that would allow foreign companies in Hong Kong that can match capitalisation and turnover requirements, to become constituent stocks of the Hang Seng Index. It will collect views until May 31.
“The proposal would be in line with Hong Kong’s position as an international financial centre,” said Daniel Wong, director and chief index officer at the Hang Seng Indexes Company, in a telephone interview with the South China Morning Post.
Since 2021, the index compiler has expanded the number of constituent stocks from 50 to 76 and has an eventual target to reach 100, without a timeline. The Hang Seng Index is tracked by index fund managers with total assets under management of US$20.34 billion as of March this year.
“At present, foreign companies are not allowed to be added to the Hang Seng Index,” Wong said. “The proposal to add in the foreign companies to join the blue chips will reposition the HSI from being a representation for Greater China companies listed in Hong Kong, to a broader representation for the overall Hong Kong stock market.”
The move to allow foreign companies to become blue chips comes at a time when bourse operator Hong Kong Exchanges and Clearing (HKEX) is seeking more international listings. The exchange will open an office in London in the first half of this year, following hot on the heels of a New York office opened in December.
HKEX signed an accord with Saudi Tadawul Group Holding in February during Chief Executive John Lee Ka-chiu’s visit to the Middle East, which could lay the foundation for Middle East companies, such as Saudi Aramco, to list shares in Hong Kong, brokers said. The oil company’s US$29.4 billion listing in 2019 on the Tadawul stock exchange remains the world record holder for stock offers.