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Powered by China, a Technology Benchmark Opens in Hong Kong – The Wall Street Journal

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Powered by China, a Technology Benchmark Opens in Hong Kong - The Wall Street Journal

The 2018 listing ceremony for Meituan Dianping, one of the Hang Seng Tech Index’s biggest constituents.



Photo:

Anthony Kwan/Bloomberg News

HONG KONG—A new technology stock benchmark that includes China’s two most valuable companies made its debut on Monday, falling more than Hong Kong’s broader stock market as it sought to give investors a better read on the tech sector’s growth and relative performance.

The Hang Seng Tech Index, which tracks 30 technology companies listed in the city, climbed as much as 2.2% on Monday morning before ending the day down 1.3%, versus a 0.4% decline in the broader 50-stock Hang Seng Index.

Three of the tech index’s biggest constituents—

Tencent Holdings Ltd.,

Meituan Dianping

and

Xiaomi Corp.

—fell, while the Hong Kong-listed shares of

Alibaba Group Holding Ltd.

ended the day unchanged. The four companies together make up a third of the index’s performance.

Various Fortunes

Five largest constituents of the two Hang Seng indexes, year-to-date performance

Flagship Index

Tech Index

Meituan

82%

Tencent*

39

Xiaomi

36

Alibaba

15

Sunny Optical

5

Ping An

–10

AIA

–12

CCB

–12

HSBC

–42

*Tencent is a key constituent in both Hang Seng flagship and Hang Seng Tech Indexes.

Sources: FactSet; Hang Seng Indexes

Many stocks in the new benchmark scored big gains earlier this year and rose last week after index compiler Hang Seng Indexes Co. unveiled plans for the technology index on July 20. “A lot of the short-term optimism” was already reflected in their prices ahead of Monday’s small declines, said Gabriel Chan, head of investment services for Hong Kong at BNP Paribas Wealth Management.

Using historical prices of the Hang Seng Tech Index’s constituent stocks, the new benchmark would have been up 45.6% in the year through July 24, according to a backdated simulation on the index provider’s website. That compared with a 15.5% gain in technology-heavy Nasdaq Composite Index over the same period.

The broad Hang Seng Index, on the other hand, is down 12.4% in the year through July 24, pulled down by the shares of banks, insurers and property developers, which have borne the brunt of China and Hong Kong’s economic weakness during the coronavirus pandemic.

Mr. Chan said Hong Kong’s market benchmark has for a long time been dominated by old-economy companies, which is why it has underperformed most overseas counterparts. As more Chinese internet and technology companies list their shares in the city, the market should benefit, he added.

“Hong Kong is really embracing China’s new economy,” said Andy Maynard, managing director of equities sales trading at China Renaissance Securities. He said the tech index reflects how the market is evolving.

Over the past nine months, three large U.S.-listed Chinese companies—Alibaba,

JD.com Inc.

and

NetEase Inc.

—have sold shares in Hong Kong and added secondary listings in the city. Mainland Chinese companies make up nearly 78% of Hong Kong’s total stock market capitalization, versus 67.5% at the end of 2018 and around 57% a decade ago, according to data from the exchange.

Last week, Alibaba’s giant financial-technology affiliate, Ant Group, said it is planning concurrent initial public offerings in Hong Kong and on Shanghai’s year-old STAR market for homegrown technology companies. The Science and Technology Innovation Board last week rolled out its own benchmark called the STAR 50 Index, which tracks 50 companies listed on its Nasdaq-style exchange.

In Hong Kong, the Hang Seng Tech Index could inspire the creation of exchange-traded funds tracking its performance, said Bruno Lee, chairman of the Hong Kong Investment Funds Association, whose members include

BlackRock Inc.,

Fidelity International and dozens of other global and Chinese asset managers. “The launch of a tech index is a timely move,” he said.

Hang Seng Indexes is also revamping its flagship benchmark, which has Tencent as its only technology stock. In May, the index compiler said it would start allowing companies with shares with unequal voting rights to join the 50-year-old index. That decision paves the way for Alibaba and other Chinese tech companies to join the main Hang Seng Index this year.

Write to Joanne Chiu at joanne.chiu@wsj.com

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