The property management units of struggling Chinese developers will engage in more mergers and acquisitions to generate much-needed cash this year, analysts forecast. Meanwhile, their healthier peers are poised to tap capital markets to raise the funds to buy some of their offloaded assets. The number of M&A deals and the transaction value in the property management segment will jump at least 20 to 30 per cent year on year, according to Raymond Cheng, an analyst at CGS-CIMB Securities in Hong Ko
Alibaba Health Information Technology, mainland Chinese developer Longfor Group Holdings and hotpot chain Haidilao International Holding will become constituent stocks of the Hang Seng Index from next month, the complier announced just before it is expected to unveil a further major expansion on Monday. The addition of the three stocks to the index from March 15 will expand the number of constituents on Hong Kong's benchmark index from 52 to 55, according to a statement from Hang Seng Indexes on Friday evening. The index compiler proposed in December to increase its constituent stocks to between 65 and 80 to achieve a reasonable representation for each industry. Today's move has prompted analysts to believe the further expansion may be announced a soon as Monday, when the results of a consultation are due to be revealed. Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China. The compiler also wants the benchmark index to have at least 25 Hong Kong firms as constituent stocks to address concerns about a drop in the representation of local companies. A consultation on the proposals ended last month. "The Hang Seng Indexes intends to increase the number of blue chips for the longer term to allow more companies from different sectors to have more representation," said Kenny Ng Lai-yin, a securities strategist at Everbright Sun Hung Kai. Ng said the three new stocks set to become blue chips would get share price support, while JD.com, which had been widely expected to join the index, may face pressure in the short-term. The three additional stocks will have a combined weighting of 2.09 per cent in the Hang Seng Index, with Alibaba Health the biggest at 0.89 per cent, Longfar second at 0.62 per cent and Haidilao at 0.58 per cent. Alibaba Health has risen 13.5 per cent this year, while Longfor gained 1.3 per cent and Haidilao added 6.6 per cent. The Hang Seng Index rose 6.4 per cent over the same period. However, the three stocks have matched or outperformed the index over the past six and 12 months. The trio will add a combined market capitalisation of US$124.5 billion to the HSI family. After the March rebalancing, Chinese social media and online games giant Tencent Holdings and insurance juggernaut AIA will remain the most-heavily weighted stock, making up 10 per cent each of the index. Their weighting may well be cut down to 8 per cent according to a cap proposed by the index compiler. Hong Kong's benchmark stock index started out with 33 stocks when it first launched. The enlargement is seen as a result of the local markets growing much bigger, particularly after listing reforms in 2018 that allowed companies with weighted voting rights and biotech firms yet to turn a profit to list. These moves brought a wave of initial public offerings (IPOs) to the city. The amount of Hong Kong dollar deposits in the local banking system surged 18.6 per cent in January as a result of the hugely popular IPO of Kuaishou Technology, the video-sharing platform whose name means "quick hands" in Chinese. The listing drew subscriptions of 1,204 times the available retail tranche of shares on offer, totalling HK$1.28 trillion (US$164.8 billion). Hong Kong has already seen 15 IPOs in January, with around HK$12.6 billion of capital raised. Last year, 154 companies sold shares to the public for the first time, generating HK$398 billion of proceeds. The IPOs led Hong Kong dollar deposits 18.6 per cent higher in January to HK$8.67 trillion. Together with a 1 per cent increase in foreign deposits, the total deposits in Hong Kong at the end of January stood at HK$15.94 trillion, which is 9.8 per cent higher than a month earlier, the Hong Kong Monetary Authority (HKMA) said on Friday. Excluding IPO effects, total deposits would have increased by 3.2 per cent while Hong Kong dollar deposits would have jumped 5.3 per cent. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.