Aluminum Corp of China and Tencent Holdings Ltd rose in Hong Kong trading yesterday on their planned inclusion in the city's benchmark Hang Seng Index.
Aluminum Corp, or Chalco, the nation's biggest producer of the metal, rose 6.26 percent to HK$13.24, its biggest one-day gain in more than two weeks.
Tencent, China's biggest provider of online chat services, rose 8.77 percent to HK$62.65.
Hang Seng Index compiler HSI Services Ltd will add Chalco and Tencent to the benchmark on June 10, replacing PCCW Ltd and Cheung Kong Infrastructure Holdings Ltd. Funds mirroring the index, including the HK$29 billion Tracker Fund of Hong Kong, must buy Chalco and Tencent shares in proportion to their weighting.
Tencent's inclusion "will significantly increase investor interest," Morgan Stanley analyst Richard Ji, who rates the stock "overweight, attractive," wrote in a report on Monday.
"The decision reaffirms our view that (Tencent) should be a core holding of a China portfolio over the long term."
HSI Services announced the changes after the market closed on May 9. Hong Kong's stock exchange was closed on Monday for the Buddha's Birthday holiday.
PCCW, Hong Kong's biggest phone operator, fell 2 percent to HK$4.9. Cheung Kong Infrastructure, billionaire Li Ka-shing's roads and power utility company, was up only 0.31 percent to HK$32.05.
PCCW has lost 96 percent of its market value since a peak in 2000 on waning demand for phone stocks and rising competition in Hong Kong. The city's fixed-line connections exceed the number of households, prompting the phone carrier to expand in pay television and mobile phone services to boost growth.
"The company's growth prospects are limited because of competition in Hong Kong's fixed-line market," said Castor Pang, strategist at Sun Hung Kai Financial & Co in Hong Kong. "PCCW's new businesses aren't doing well enough at this stage to boost the company's appeal to investors."
PCCW peaked at the equivalent of HK$131.75 on Feb 15, 2000, before declining amid a crash in global technology stocks.
The Hang Seng Index rose 1.95 percent to 25552.77 points yesterday, tracking overseas markets, led by heavyweights HSBC Holdings and China Mobile.
The China Enterprises Index of Hong Kong-listed mainland companies, or H shares, rose 2.31 percent to end at 13997.91. Mainboard turnover rose to HK$80.84 billion from HK$77.27 billion on Friday.
Source:China Daily/Agencies
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