Lenovo falls after decision to drop shares from Hang Seng Index

Lenovo Group Ltd. declined after a decision to drop its shares from Hong Kong’s benchmark stock gauge.

The Beijing-based company will be replaced by CSPC Pharmaceutical Group Ltd., as part of Hang Seng Indexes Co.’s quarterly review. The re-balancing will take effect on June 4, the index compiler said in a statement on Friday. The personal computer maker’s stock fell as much as 2.7 percent, while CSPC Pharma’s stock gained as much as 5.4 percent.

Lenovo had plunged 57 percent since it was added to the gauge in 2013 to lose $5.9 billion in value through Friday. The company has struggled to revive its business as it lost market share in mobile. Removal from the gauge could spur more outflows from Lenovo, as at least $107 billion worth of passive funds track the Hang Seng Index, data compiled by Bloomberg show.

“The removal is a major psychological blow to investors, so the downward pressure on the stock price is likely to continue,” said Qian Kai, an analyst with China International Capital Corp.

“While we respect the review results of Hang Seng Indexes, we are singularly focused on our ongoing transformation to drive sustainable long-term returns for our shareholders,” Lenovo said in an emailed statement.

China has signaled its support for the nation’s healthcare industry, contributing to CSPC Pharma’s inclusion in the Hang Seng Index. Shares of the Chinese drugmaker had gained 29 percent this year through Friday, among the best-performing healthcare companies in Asia. The surge, which took its market value to $16 billion, also came as the FDA in recent months approved CSPC Pharma’s products treating tumors and amyotrophic lateral sclerosis.

Lenovo Hang Seng Index

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Lenovo falls after decision to drop shares from Hang Seng Index