Preview of the Shanghai-Hong Kong Stock Connect and Hang Seng Index Adjustment: It is expected that 24 companies will be included in the Hong Kong Stock Connect, and 27 may be removed.

HSI Index Company will announce the results of the review of the Hang Seng series of indices on February 21 (Friday) after the market closes (the review deadline is December 31, 2024), with CICC recently releasing a preview of the Hong Kong Stock Connect and Hang Seng Index adjustments. CICC pointed out that it is expected that 24 companies such as CR BEVERAGE (02460) and BEKE-W (02423) may be included in the Hong Kong Stock Connect, while 27 companies may be removed. NIO-SW (09866), JD LOGISTICS (02618), INNOVENT BIO (01801), and POP MART (09992) are among the top candidates for inclusion in the Hang Seng Index adjustment. CICC's main points are as follows: After the market closes on February 21, 2025 (Friday), the Hang Seng Index Company will announce the results of the semi-annual review of the Hang Seng series of indices (the review deadline is December 31, 2024), involving the Hang Seng, H-share, Hang Seng Technology, and other major flagship indices of Hong Kong stocks, as well as the Hang Seng Composite Index closely related to the Hong Kong Stock Connect investment scope. Due to the significant changes usually seen in semi-annual reviews and the large passive fund size tracking the flagship indices (according to Bloomberg and Wind statistics, the ETF sizes tracking the Hang Seng, H-share, and Hang Seng Technology indices are approximately 27.53 billion USD, 5.41 billion USD, and 18.66 billion USD respectively), potential changes in constituent stocks and corresponding fund flows are worth paying attention to. Based on publicly available data, we have previewed potential adjustments as follows for investors' reference. Hang Seng Index adjustment: NIO-SW, JD LOGISTICS, INNOVENT BIO, and POP MART are among the top candidates for inclusion Potential adjustment candidates: Based on the Hang Seng Index adjustment method and our understanding and verification of non-quantitative adjustment criteria through previous actual adjustment results, we have estimated a list of potential candidates who rank high in the Hang Seng Index and are likely to be included. Our calculations prioritize market capitalization ranking, combined with factors such as industry representation and coverage. Based on the above predictions, we have calculated the potential weights and fund flows of individual stocks in the report. However, it should be noted that historical experience shows that actual results may differ significantly from this rank-based selection. For example, INNOVENT BIO and JD LOGISTICS have ranked high in previous forecasts but ultimately were not included, possibly due to factors considered by the index consultation committee such as industry and listing representation, which are not detailed or quantified, and the possibility of other non-quantitative factors influencing final decisions. Hong Kong Stock Connect and Hang Seng Composite Index Adjustment: 24 companies such as CR BEVERAGE and BEKE-W are expected to be included, while 27 may be removed This adjustment coincides with the half-yearly index review of the Hang Seng Composite Index (which is adjusted twice a year on June 30 and December 31 as the cut-off calculation date). As the Hang Seng Composite Index is a sample space for Hong Kong Stock Connect investment, its changes will directly affect the investment scope of Hong Kong Stock Connect. It is worth mentioning that this adjustment also coincides with the Hang Seng Index Company's optimization of its method for calculating the 12-month average market capitalization of the sample (from the average market capitalization at the end of each month in the past 12 months to the average market capitalization on each non-suspended trading day in the past 12 months) and the way it handles long-term suspended securities (the pre-resumption market value and liquidity data will be excluded from the test calculation). Based on the method of adjusting the Hang Seng Composite Index, and additional criteria required to qualify for inclusion in the Hong Kong Stock Connect (such as having a market capitalization of over HK$5 billion for small-cap stocks in the Hang Seng Composite Index, excluding stocks under trading warnings implemented by the exchange, suspended from listing, or in the process of delisting; companies with dual-class shares also need to meet additional criteria such as being listed for 6 months and having market value and trading volume conditions), we estimate that this time or a total of 24 stocks meet the criteria for inclusion in the Hong Kong Stock Connect. Conversely, we estimate that 27 stocks may be removed from the Hong Kong Stock Connect due to reasons such as market capitalization being less than HK$4 billion, market capitalization coverage ranking below 96%, or suspension from trading, among others. For specific details of the forecast for inclusion and exclusion, please refer to the original report. In addition, BEKE-W has returned to dual major listing in Hong Kong in mid-2022 and is currently a large-cap stock component of the Hang Seng Composite Index. Due to the nature of dual-class shares, additional requirements must be met to qualify for inclusion in the Hong Kong Stock Connect: 1) listing for a minimum of 6 months and 20 trading days; 2) average market capitalization not less than HK$20 billion and trading volume not less than HK$6 billion in the 183 days before the review date. We calculate that in the 183 days leading up to December 31, 2024, its average daily market capitalization in Hong Kong reached HK$161.12 billion, and the total trading volume reached HK$16.16 billion, meeting the requirements for dual-class share companies to be included in the Hong Kong Stock Connect. Therefore, we expect BEKE-W to undergo a Hong Kong Stock Connect inclusion inspection around March 6 and be included in the adjustment around March 10. Similarly, we calculate that HORIZONROBOT-W, which went public on the Hong Kong Stock Exchange on October 24, 2024, also meets the average daily market capitalization and trading volume requirements for inclusion in the Hong Kong Stock Connect for dual-class share companies, but may not qualify for inclusion this time due to not having been listed for a full 6 months and 20 trading days. However, it is highly likely to be included in the next round of biannual review in September 2025. Timeline: Results announced on February 21st, execution on March 10th; Hong Kong Stock Connect constituents adjusted accordingly In terms of timing, the Hang Seng Index Company will announce the official results of the adjustment of the Hang Seng series of indices after the market closes on February 21, 2025 (Friday), and the adjustment will be officially implemented on March 10, 2025 (Monday). After the index adjustment takes effect on March 10, the Shanghai and Shenzhen Stock Exchanges will subsequently (depending on the specific time announced by the exchanges) adjust the investable range of the Shanghai-Shenzhen-Hong Kong Stock Connect based on this. During this period, similar to MSCI index adjustments, some actively managed funds may still engage in arbitrage operations based on the adjustment results, but passive funds will choose to minimize tracking errors by making adjustments on the trading day before the effective date (i.e., March 7).Adjustment of positions. At that time, trading of related stocks may experience a volume far greater than usual, especially during the closing session.Podemos tomar un caf despus si quieres.