Rebecca Sin, from Bloomberg Intelligence, believes that adding foreign stocks to the index could encourage more global companies to consider listing in Hong Kong. This development comes at a time when the city is grappling with a declining market. The Hang Seng index has witnessed a more than 6% drop this year, following its fourth consecutive annual loss in 2023. The healthcare sector, which remains significantly underrepresented with a market cap coverage of less than 50%, may also see additions such as BeiGene Ltd. and Innovent Biologics Inc.

Why It Matters: The potential inclusion of foreign companies in the HSI comes at a time when Hong Kong’s stock market is facing challenges due to various factors, including U.S. inflation fears roiling Asia-Pacific markets. This move could potentially boost the market’s global appeal, especially amid the backdrop of underperforming Chinese and Hong Kong markets, which some experts see as offering potential investment opportunities.

The move also reflects the growing significance of the Hong Kong stock market as a listing destination, a trend that has been underscored by the historic market valuation of NVIDIA Corporation which equaled the entire Chinese stock market in early February. This development could potentially further elevate Hong Kong’s status as a global financial hub.