Sino Biopharmaceutical added to Hong Kong index of Chinese stocks amid Beijing’s biotechnology push

An index that tracks shares of mainland Chinese companies on the Hong Kong stock exchange will admit a pharmaceutical stock and a utility, index compiler Hang Seng Indexes said on Friday. The companies replace a railway company and a building materials producer, partly reflecting the changing profile of China’s economy.

Sino Biopharmaceutical and China Resources Gas Group will replace the H shares of China Railway Group and China National Building Material on the Hang Seng China Enterprises Index (HSCEI) from December 9. Sino Biopharmaceutical will have a weighting of 1.44 per cent on the index, while China Resources Gas will have a weighting of 1.33 per cent.

Sino Biopharmaceutical’s addition reflects an emphasis in Beijing on developing the country’s biotechnology sector. It was one of the 10 key sectors earmarked for development under its “Made in China 2025” industrial strategy. Equally importantly, this pushed Hong Kong to set itself the target of attracting more initial public offerings by biotechnology companies when it introduced its largest listings reforms in three decades last year.

Moreover, railway and construction material stocks are no longer the “darlings of investors”, Louis Tse Ming-kwong, managing director of VC Asset Management, said. “In contrast, medical and energy stocks have taken centre stage in China’s economic development in recent years,” he added.

The inclusion will also please Eric Tse, the company’s largest shareholder. The 24-year-old became a billionaire overnight last month after his parents, the billionaire founder of Sino Biopharmaceutical and his wife, transferred a fifth of the company’s share capital – about US$3.8 billion – to him as a gift.

The announcement by index compiler Hang Seng Indexes is a big boost to the company, as many passive funds that track the HSCEI are likely to pick up any shares that are added as constituent stocks. Shares in the company, which produces western as well as Chinese medicines, closed 2.48 per cent lower on Friday at HK$11.8, before the index compiler’s announcement.