Hong Kong Stock Connect March Adjustment Outlook: 44 Hong Kong stocks are expected to be included, including INSILICO (03696), JD INDUSTRIALS (07618), etc.

According to the quarterly review results announced by the Hang Seng Index Company on February 13, the adjustments will officially take effect on March 9 (next Monday). After the index adjustment takes effect on March 9, the Shanghai and Shenzhen Stock Exchanges will adjust the eligible investment targets for the Shanghai-Shenzhen Stock Connect based on this (specific time will be announced by the stock exchanges). Hong Kong stock connect March adjustment is about to take effect, with 44 stocks expected to enter the connect Based on the comprehensive index changes and Hong Kong stock connect index changes announced by the Hang Seng Index Company, and combined with predictions from various brokerage institutions, a total of 44 stocks are most likely to be newly added to the Hong Kong stock connect for investors to reference. For accurate information on Hong Kong stock connect changes, please refer to the official announcements from the Hong Kong Stock Exchange, Shanghai Stock Exchange, and Shenzhen Stock Exchange. Considering the requirements of the Hang Seng Composite Index constituents, as well as additional criteria for inclusion in the Hong Kong stock connect (such as the market value of small-cap stocks in the Hang Seng Composite Index needing to be above HK$5 billion, excluding risk warning or delisted stocks, and additional conditions such as same-shares-different-rights companies needing to meet listing requirements for at least 6 months and market value turnover), a total of 44 stocks are expected to meet the criteria for inclusion in the Hong Kong stock connect, including: BANK OF E ASIA(00023), CTF SERVICES(00659), DEEPEXI TECH(01384), SOFTCARE(02698), CHUANGXIN IND(02788), QFIN-S(03660), JD INDUSTRIALS(07618), INSILICO(03696), 160 HEALTH(02656), AB&B BIO-TECH-B(02627), BAO PHARMA-B(02659), PEGBIO CO-B(02565), GENFLEET-B(02595), XUANZHUBIO-B(02575), etc. 1. Companies that have already been included in the Hang Seng Big and Medium Index constituents will definitely be included in the Hong Kong stock connect. 2. There are 37 other companies that may also be included in the Hong Kong stock connect. It should be noted that HASHKEY HLDGS(03887) and OSL GROUP(00863), as new listings of virtual asset platforms, although they meet the criteria for inclusion in terms of market capitalization coverage and turnover rate, there may still be variables due to the nature of their virtual asset platform, so investors need to pay attention to this possibility. In addition, some companies may also be included for other reasons: NANHUA FUTURES(02691) was directly included in the Hong Kong stock connect trading on January 19 after the end of the 30-day price stabilization period due to the dual listing nature in A and H markets; OmniVision Integrated Circuits Group, Inc.(00501) and GigaDevice Semiconductor Inc.(03986) as A+H companies newly listed in the Hong Kong stock market in January this year will also be gradually included after the price stabilization period. In terms of same-shares-different-rights companies, GEEKPLUS-W(02590) was already included in the Hong Kong stock connect in February this year, HESAI-W(02525) is expected to be included in April, and MININGLAMP-W(02718), PONY-W(02026), and WERIDE-W(00800) as they listed in November last year, will have to wait until the second half of this year to be included. Significant liquidity effects of Hong Kong stock connect adjustments evident Reviewing the Hong Kong stock connect adjustments from February 2017 to the present, during the window period from the announcement of the Hang Seng Composite Index adjustment results to the effective date, the newly included stocks typically exhibit significant and stable excess returns compared to the Hang Seng Index. There are various possible reasons for this phenomenon, including index constituent adjustments leading to passive buying of related ETFs, influx of Southbound Hong Kong stock connect funds due to the new connect stocks, speculative funds in the market leveraging concepts, and some of the newly added Hong Kong stock connect stocks having relatively low actual trading volumes due to their recent listing. From historical performance, the adjustments of the Hong Kong stock connect significantly impact the liquidity and price movements of related stocks. For example, during the September 2025 Hong Kong stock connect adjustment, according to LiveReport's big data statistics, on the day the adjustment took effect on September 8, the average trading volume of the 20 newly added stocks increased by approximately 4.3 times compared to the previous average daily trading volume. Taking COUNTRY GARDEN(02007) as an example, before its inclusion in the connect, the average daily trading volume was less than HK$50 million, but on the day before inclusion, it surpassed HK$100 million. On the first day of inclusion on September 8, the trading volume soared to HK$485 million, a tenfold increase compared to the previous daily average. The stock price also rose by 6.25% on that day, significantly outperforming the 1.54% increase in the Hong Kong property stock index. On the following trading day, COUNTRY GARDEN continued to strengthen in the morning session, with trading volume reaching 988 million shares within just one hour of trading, with a turnover of HK$592 million, exceeding the full-day level of the first day of inclusion. Commenting on this performance, Yuan Mei, Research Director of Sullivan Jiali Technology (Shenzhen) Co., Ltd., pointed out that COUNTRY GARDEN truly benefited from improved liquidity in this round of inclusion, and because the stock price did not significantly rise before inclusion, this time it showed a more typical "compensation increase". DUALITYBIO-B(09606) also performed remarkably well, with its stock price already showing strength before inclusion in the connect, having risen by 7.14% on the day before inclusion (September 5), with a trading volume of HK$168 million. On the day of inclusion, September 8, the trading volume soared to HK$1.394 billion, ranking as the top among all newly added stocks. In the following week, the company's stock price continued to rise, with a cumulative increase of over 40%, indicating strong market enthusiasm. BRAINAURORA-B(06681), MIRXES-B(02629), BRETON(01333), AUNTEA JENNY(02589), and several other Hong Kong stocks showed similar trends, with significant fluctuations in stock prices and trading volumes, with daily average trading volumes increasing several times to several tens of times compared to before inclusion. Beware of arbitrage liquidation in the wake of inclusion It is worth noting that for newly listed stocks with small float, after being included in the Hong Kong stock connect, although they may experience a short-term speculative frenzy due to passive buying pressure from capital inflows, they often face the risk of sharp corrections once the speculative funds unwind. Take TRANSTHERA-B(02617) as an example. The stock price accelerated after being included in the Hong Kong stock connect, with a 20.13% surge on September 8, with a peak increase of over ten times in just a few trading days. The trading volume on the day of inclusion was HK$196 million, a several tens increase compared to the previous daily trading volume. However, starting from September 16, TRANSTHERA-B witnessed a sudden plunge, dropping by 53.73% that day, followed by a further 12.43% decline on September 18, causing significant losses for investors who chased the high. Market analysis suggests that this clinical-stage biopharmaceutical company showed signs of fatigue when it listed in June 2025: with an IPO of only HK$200 million, high concentration of ownership, and an international subscription rate of only 0.95 times. After being included in the connect, 15 related ETFs with a combined scale of nearly HK$50 billion had to passively build positions due to index rules, resulting in over HK$1 billion in capital inflows, while the company's daily average trading volume before inclusion was only about HK$15.88 million, making it difficult for its tiny float to absorb such massive passive funds, leading to a surge in stock prices in the short term - a 77% increase on September 12 and another 116% increase on September 15. The "brutal plunge" on September 16 was the result of speculative funds unwinding their positions by taking advantage of passive fund buying, resulting in losses not only for individual investors who directly bought through the Hong Kong stock connect, but also for investors who indirectly participated through ETF funds, making both groups of investors fall victim to arbitrage speculators. Similarly, BAYZED HEALTH(02609) experienced significant volatility after inclusion in the connect, with a more than 27% surge on September 12, a daily volatility exceeding 26%, and volatility exceeding 50% for the next three trading days, as the stock price experienced consecutive surges followed by consecutive drops of over 10%. In a previous research report, Huatai mentioned that the latest Hong Kong stock connect adjustment showed clear signs of front-running, as the substantial inflow of Southbound funds became a key incremental fund source, leading to excess returns for potential inclusion candidates far exceeding historical averages during the inspection period leading up to the announcement date. However, this fund game also resulted in excess returns turning negative from the announcement date to the effective date, with a clear trend of profit-taking by arbitrage funds. Looking ahead to this adjustment, Huatai believes that Hong Kong stock connect trading this year may shift more towards the left side. With Southbound fund inflows slowing by 20% to 40%, excess returns for newly included stocks in the connect may be lower compared to 2025, but are expected to still be higher than historical averages.