July 30, 2020 / 9:37 AM / 5 days ago

Goldman expects new tech indexes to bring China $25 billion passive inflows in five years

HONG KONG (Reuters) - Mainland China and offshore hub Hong Kong’s latest indexes representing technology companies are likely to attract $25 billion in five years from passive investors, according to a Goldman Sachs report released on Thursday.

Hong Kong’s Hang Seng TECH index .HSTECH launched on Monday and the Shanghai stock exchange published the STAR 50 index .STAR50 for the largest stocks on its year-old Nasdaq-style board last week.

Over the next five years, index-tracking and exchange-traded funds could pour $11 billion into the STAR 50 and $14 billion into the Hang Seng TECH, the investment bank’s analysts estimated.

The TECH index could grow from $150 billion to $870 billion and the STAR 50 from $40 billion to $800 billion in this time.

“Overall, we’d view our assumptions as conservative and hence the risk of potential inflows could skew to the upside,” they wrote.

The two markets are adding more tech companies, which are increasingly significant in the Chinese economy, to key indexes.

Shanghai revamped its benchmark .SSEC this month. Household names Alibaba (BABA.N) (9988.HK), Meituan Dianiping (3690.HK) and Xiaomi Technology (1810.HK) may join Hong Kong's Hang Seng Index .HSI next month.

Internet giant Tencent (0700.HK) would be the biggest loser with $1.2 billion of passive outflows should all three be incorporated, while insurer AIA Group (1299.HK), in second place, could lose $121 million, said the report.

Reporting by Noah Sin; Editing by Rashmi Aich

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