Jan 14, 2020 06:45 AM

Should Hang Seng Be Reformulated? Operator of Hong Kong Index Asks

Hong Kong’s Hang Seng Index mulls whether to expand to include more mainland tech companies.
Hong Kong’s Hang Seng Index mulls whether to expand to include more mainland tech companies.

The operator of the Hong Kong stock market’s benchmark index is soliciting public opinions on whether to include more mainland companies, especially big tech companies with weighted voting rights (WVR) such as Alibaba Group Holding Ltd., Xiaomi and Meituan Dianping.

In a questionnaire published Monday on the website of Hang Seng Indexes Co. Ltd., the operator of the Hang Seng Index (HSI) seeks opinions from market participants and stakeholders on the positioning of the 50-year-old index and the eligibility of certain companies for inclusion.

Created in 1969, the HSI has become one of the world’s most famous stock market gauges. It was originally designed to represent the Hong Kong stock market by reflecting the performance of the largest and most liquid companies, in much the same way the Dow Jones Industrial Average does for New York stocks. Over the past half century, the Hong Kong stock market has evolved and become significantly more layered and geographically expanded, with around 60% of listed companies coming from mainland China, according to the questionnaire.

The survey asks whether the HSI should represent listed companies from the Greater China region and whether there is a need to maintain a reasonable balance between Hong Kong and non-Hong Kong constituents.

The questionnaire also asks whether companies with WVRs and secondary-listed Greater China companies should be eligible for inclusion and whether there is any need to limit their proportion in the index.

Also known as the dual-class share structure, WVR is a stockholding system under which the voting power attached to certain shares is greater than that of an ordinary share. They are favored by founders of tech and family-owned companies as a way of retaining control of their businesses after public listings.

Advocates see WVR as an excellent investment opportunity that is too good to ignore, while opponents have raised concerns about the unequal voting rights, which might put general shareholders at a disadvantage given the superior weighting accorded certain minority shareholders, the HSI operator said in the questionnaire.

Three WVRs are listed in Hong Kong: Xiaomi, Meituan and Alibaba. Alibaba is also the first overseas issuer to make a secondary listing in Hong Kong. It is expected that more Greater China companies with primary listings abroad will come to Hong Kong for secondary listings.

The financial sector has been dominant in the HSI. Currently there are 11 finance stocks among the index’s 50 constituents, which collectively account for nearly half of the index weighting. The questionnaire asks whether the weighting of the financial sector in the HSI is an issue that needs to be addressed and whether sector capping a good way to prevent any sectors from overly dominating the index.

Feedback must be submitted by March 13.

Contact reporter Denise Jia (

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