Hong Kong Indexes’ new rule will allow Ant Group to swiftly join its China gauge
- Ant could join the China Enterprises Index as soon as the market close of November 18, if the company’s market value ranks within the top 10 of current members
- The new rules make the China gauge ‘more representative’, says Hang Seng Indexes director
Hong Kong’s stock index compiler is rolling out the red carpet for new listings in its China gauge, just days before the biggest initial public offering of all time.
The new rules make the China gauge “more representative”, said Daniel Wong, director and head of research and analytics at Hang Seng Indexes. He added that the composition of the benchmark Hang Seng Index is also being reviewed, which comes after revamps this year.
What is Jack Ma’s Ant Group and how does it make money?
“The Hang Seng Index is filled with laggards like financials. So it may not capture the best investment opportunities out there,” said Kenneth Lau, a senior portfolio manager at BEA Union Investment Management. “That’s why we are overweight mainland Chinese stocks and underweight Hong Kong stocks, because the growth outlook in China is much better.”
For that gauge, stocks are currently required to have a minimum three months of listing history before possible inclusion. For a new stock to join, a current Hang Seng Index member has to make way. Swire Pacific and CK Infrastructure Holdings. were among stocks seen at risk in August’s quarterly review, in which Alibaba Group Holding and Xiaomi were included, but both remain members for now.
Ant is widely seen as eventually joining the benchmark, which would help its stock attract extra passive fund inflows in addition to the US$19.8 billion tracking the index as of end-September, according to data from Hang Seng Indexes. That compares to about US$5.4 billion following its China Enterprises index.
“It’s just a matter of time before Ant is included in the Hang Seng Index,” said Kenny Wen, a strategist at Everbright Sun Hung Kai. “The new rule reflects the index company’s effort to lift the weighting of tech stocks and meet investors’ needs.”