Hong Kong’s benchmark stock index undergoes a historic revamp that will open the door to the likes of Chinese tech giants like Xiaomi at the cost of tolerating unequal voting rights and less transparent reporting.
Hong Kong’s Hang Seng Index (HSI) will allow the inclusion of firms with weighted voting rights (WVR) and secondary listings. In addition, the benchmark will also follow the selection criteria of HSCEI – the pure mainland version of HSI – which will loosen the eligibility criteria removing requirements related to listing history, price volatility and financial performance.
WVR allows one share class, typically held by founders and management, to have more voting rights per share compared to the second class share offered to retail investors. And on secondary listings, it will allow such firms to skirt disclosure requirements that apply to other constituents on the index.
Implementation of the landmark changes and new stock inclusions to the index could begin as early as August 2020.
«Strongly Supported» by 50-Odd Individuals
«The decision to add these companies into the Hang Seng Index is strongly supported by the market, with 90 percent of respondents are in favor,” according to an «SCMP» report citing Vincent Kwan, chief executive of Hang Seng Indexes.
Kwan’s description of strong support was based on a survey of just 58 individuals from 52 organizations found in Hang Seng Indexes’ consultation report. Based on absolute figures, the firm is launching historic transformations with unseen consequences from WVR, secondary listings and looser eligibility criteria with support from 52, 51 and 38 respondents, respectively.
«The change will be an important milestone for the Hang Seng Index to cover the increasing number of technology companies listing in Hong Kong.»
