Alibaba and Xiaomi Get Into Hong Kong’s Benchmark Index

(Bloomberg) — Chinese tech giants Alibaba Group Holding Ltd. and Xiaomi Corp. will be included in Hong Kong’s Hang Seng Index in one of the biggest revamps in the benchmark market indicator’s 50-year history.

Also joining will be Wuxi Biologics Cayman Inc., Hang Seng Indexes Co. said Friday as it unveiled the first major changes since the compiler began allowing dual-class shares and secondary listings.

The move could affect tens of billions of dollars in pension fund assets and exchange-traded funds that track the index. Sino Land Co., Want Want China Holdings Ltd. and China Shenhua Energy Co. were forced out of the 50-member gauge. The changes will be effective Sept. 7.

The Hang Seng Index is down 11% this year, compared with a 15% gain for China’s CSI 300 Index and a 23% rise for the Nasdaq Composite.

Alibaba’s inclusion builds on the trend of China’s technology giants gaining more clout in Hong Kong markets — so much so that Hang Seng Indexes recently launched a new measure focused on tech.

“The inevitable trend is for Hong Kong’s equity benchmark to lose more local features and represent more of the Chinese economy,” said Jackson Wong, asset management director at Amber Hill Capital Ltd, before the announcement. “Adding these companies will help it better reflect changes in the city’s equity market.”

As of Friday’s trading close, at least 26 of the 50 Hang Seng members generate the majority of their revenue from the mainland.

More listings of mainland Chinese companies are in the pipeline, such as by Alibaba founder Jack Ma’s Ant Group, after debuts by NetEase Inc. and JD.com Inc. Listing closer to home has become more attractive as tensions between Washington and Beijing threaten to curtail Chinese companies’ access to U.S. capital markets.

Dual-class and secondary listings will each be subject to a 5% weighting cap, compared with a maximum 10% limit for others. Dual-class shares were long blocked from listing in Hong Kong reflecting concerns over unequal voting rights until Xiaomi’s 2018 debut.