Hong Kong (CNN Business)Hong Kong is launching a new Nasdaq-like technology index. It’s a sign that the Asian financial hub, caught in a battle for its future between East and West — is prepared to embrace its role as a gateway for China’s tech industry to the world.
Hang Seng Indexes, the city’s leading index compiler, on Monday announced the creation of a new benchmark that will track the 30 largest tech firms that trade in Hong Kong. The Hang Seng TECH Index is expected to debut next week. Hong Kong’s role as a global financial center has been shaken in recent months by tensions between the United States and China, which have intensified as Beijing moves to tighten its grip on the city. A sweeping national security law that China imposed on the city has been criticized by some as undermining the political and legal freedoms that have existed since Britain handed the former colony to China in 1997. The tech index, though, suggests that Hong Kong is looking to shore up its position as the geopolitical fallout spreads.Chinese companies facing pushback in the US could seek refuge in Hong KongThe city has recently become increasingly attractive to Chinese companies that fear for their business prospects in the United States. Alibaba (BABA), NetEase (NTES) and JD.com (JD) — all of which trade in New York — have in recent months held secondary listings in Hong Kong. And Ant Group, the company behind the Chinese mobile payments business Alipay, announced Monday that it has chosen both Hong Kong and Shanghai for its initial public offering.Read MoreSome of China’s biggest tech champions, including Alibaba, Tencent (TCEHY), Meituan Dianping and Xiaomi, will all be included on the new tech index. They will have a combined weighting of more than 33%.”The tech sector has become increasingly important for the Hong Kong market,” said Daniel Wong, director and head of research and analytics at HSI. “We hope the move will help attract more tech companies to list in Hong Kong.”The rise of China’s tech sector in Hong Kong likely won’t end with the creation of this new index, either. Starting next month, more tech stocks might also start appearing on the Hang Seng Index (HSI), the city’s main benchmark. The index compiler changed the rules in May to allow companies that have chosen the city for their secondary listing to appear on the index. Market support for the change was “overwhelming,” Hang Seng Indexes said at the time. “Hong Kong’s stock market is becoming more tech-heavy, and that’s good for its status as an international financial center,” said Kenny Tang, co-founder and chief executive for Hong Kong-based Royston Securities.The 51-year-old Hang Seng Index is dominated by financial conglomerates and local property developers, including HSBC (HBCYF), CK Hutchison (CKHUY) and Sun Hung Kai Properties (SUHJF). Only three of its 50 components are tech firms.But the influx of Chinese tech firms in recent months has dominated trading. Tencent, Alibaba and Meituan, for example, were the most actively traded stocks in the city last month, accounting for more than 20% of the total turnover. Only Tencent is currently listed on the city’s benchmark index. “The coming of Chinese tech companies to Hong Kong will fundamentally transform the city’s stock market,” Tang said. Other analysts have pointed out that Hong Kong’s role as a global business hub has been evolving as China takes greater control of the semi-autonomous region. Brock Silvers, chief investment officer for Adamas Asset Management, told CNN Business last week that the city could find “new relevance” as a center for Chinese finance.Investors apparently like the new direction. Alibaba’s stock has jumped more than 35% since it first started trading in Hong Kong last November. JD.com and NetEase, meanwhile, are up 7% and 15%, respectively, since they listed last month.More companies could consider Hong Kong listings. More than 30 US-listed Chinese companies meet requirements for a secondary listing in Hong Kong, including Pinduoduo and Baidu, according to data provider Refinitiv.