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Hang Seng Index gains as new rules allow Alibaba, Xiaomi to be added

Hong Kong benchmark Hang Seng Index managed to close just shy of 24,000 as it announced new rules to incorporate secondary listings and dual class shares.

Source: Bloomberg

Hong Kong stock benchmark Hang Seng Index (HSI) is off to a strong start this week, rallying a total of 1.23% on Monday 18 May 2020, as the bourse introduced new rules that would allow it to include Chinese tech giants like Alibaba, Xiaomi and Meituan Dianping.

The index managed to close just shy of the 24,000 mark for the day, based on IG trading data.

Monday’s gains reverse the losses made last Friday 15 May, when the Hang Seng descended nearly 1.0% after mid-day following renewed US-China tensions and lower China consumption and retail data for the month of April.

Hang Seng to add secondary listings and dual class shares

Under the new regulations, secondary-listed companies from the Greater China region (covering Hong Kong, Mainland China, Macau and Taiwan) as well as dual class shares will be included in the overall weightage of the index at an initial 5% weighting cap.

This would mean that share price movements of Chinese internet conglomerates like Alibaba Group Holding and Xiaomi Corporation, which have secondary listings on the Hong Kong stock exchange, will now be tracked and tabulated into the overall index.

Following the announcement, Alibaba’s Hong Kong share price rose to finish the day at HK$203 per share, its highest level, in a month.

IG is a world-leading online trading and investments provider for thousands of financial markets. With CFDs (read all about CFDs here), you can buy long or sell short on the Hang Seng Index and other indices depending on whether you think prices will rise or fall. Start today by opening an IG account.

HSI’s gains led by oil’s rebound

Hang Seng’s gains on Monday had also started with oil’s price rallies. WTI and Oil - Brent crude's July 2020 futures contracts both rose to their highest in more than a month on Monday, hitting US$31.05 per barrel and US$33.99 respectively.

Consequently, stocks of Chinese oil giants also rallied, led by China National Offshore Oil Corporation (CNOOC), which soared nearly 8.0% on the day. Stocks of PetroChina and Sinopec rose 4.6% and 3.0% respectively.

Oil is rising on the back of output reduction and early signs of growing demand with more countries now starting to ease their travel and border restrictions.

Meanwhile, share prices of smartphone parts supplier Sunny Optical Technology Group and AAC Technologies Holdings were unable to participate in the excitement over the Hang Seng Index’s new changes. Each company’s stocks crashed over 11% and 6.0% as US-China trade concerns carried over from last week.

Market sentiments remain mixed: analyst

With US and China embroiled in yet another trade-related tussle, and US Federal Reserve chair Jerome Powell warning that a full economic recovery could only take place toward the end of 2021, market sentiments remain mixed going into the rest of the week.

As IG analyst Pan Jingyi wrote in her latest note: ‘At the root of the oscillating sentiment may be the fact that there remains a significant bout of uncertainty with regards to the present Covid-19 situation.

‘The lack of information to assess the situation of this novel coronavirus and its long-term effect continue to underpin the likelihood of a bumpier ride ahead.’

How to trade Hong Kong and China stocks with IG

Are you bullish or bearish on Alibaba, Xiaomi, CNOOC shares and other Hang Seng Index stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:

  • Create a live or demo IG Trading Account or log in to your existing account
  • Enter <company name> or <ticket code> in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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