MSCI TO ADD DUAL-CLASS STOCKS

Xiaomi, Meituan among 9 new inclusions to benchmark All-Country World Index

XIAOMI Corp and Meituan Dianping will be among the companies with unequal voting structures added to some of the world’s largest equity benchmarks later this month.

MSCI Inc said it would add nine stocks with dual-class shares to its global benchmark MSCI AllCountry World Index.

Seven of the companies are based in China, while the others are in the United States, a quarterly review dated February 11 stated. The Chinese firms, which include Tencent Music Entertainment Group, will also be added to the MSCI China All Shares Index.

The inclusions came after MSCI temporarily blocked firms with dual-share class from entering its indices while it conducted a consultation in 2017 and last year.

In October, the index compiler decided to allow companies with multiple share classes to stay in its benchmarks.

Index compilers like MSCI have been grappling with dual-class shares since Snap Inc took the notion to the extreme by giving zero voting rights to investors in its US$3.4 billion (RM13.86 billion) listing in 2017.

S&P Dow Jones Indices and FTSE Russell decided to exclude some dual-class shares going forward. MSCI took a different tack, creating substitute benchmarks for investors who didn’t want to touch the share class.

Corporate governance advocates argue that shares with weighted voting rights give undue authority to founders at the expense of ordinary shareholders, making it harder for investors to influence the board.

The structure’s supporters say such shares enable executives to focus on the long term and resist expectations by major investors that each quarter’s earnings will be better than the last.

The issue took on added prominence last year when exchange operators, here, and in Singapore amended listing rules to let companies with the share structure apply for a public offering.

The changes by MSCI are part of 17 additions and one deletion to the MSCI All-Country World Index. KKR & Co and Altice USA Inc were the two US dual-class stocks added, and Adyen NV will also join the measure.

Foxconn Industrial Internet Co will be included in the MSCI Emerging Markets Index.

The changes take effect at the close of trading on February 28.

Xiaomi rose 0.4 per cent as of 1.34pm, here, heading for its highest close in a month. The stock saw a wave of sales after the end of its lockup period, when key investors were banned from selling. Meituan Dianping was down 3.9 per cent after surging 32 per cent during a seven-session win streak.

Foxconn Industrial Internet rose 2.8 per cent in Shanghai, while Hon Hai Precision Industry Co closed three per cent higher in Taipei.