CICC: Coverage of industrial and healthcare sectors increased after Hang Seng Index quarterly review adjustment, 6 stocks may be included in the Hong Kong Stock Connect.

CICC released a research report stating that Hang Seng Index Company announced the results of its regular quarterly index adjustment. This adjustment covers major stock flagship indexes in Hong Kong such as the Hang Seng Index, the Mainland Enterprises Index, and the Hang Seng Technology Index. In terms of industry coverage and representation, the coverage of the industrial and healthcare markets has increased. According to the industry classification by Hang Seng Index Company, after this adjustment, the coverage of the healthcare industry has increased from 38.8% to 44.3%, and the coverage of the industrial sector has increased from 54.3% to 56.0%. In addition, the Hang Seng Composite Index, which directly determines the investable scope of the Hong Kong Stock Connect, has also been adjusted. Based on the adjustment of the Hang Seng Composite Index and the additional requirements for inclusion in the Hong Kong Stock Connect, it is expected that 6 stocks will meet the inclusion criteria. The Minimax-W, which is entering the Hang Seng Composite Index this time, due to its dual-class share structure, needs to meet additional conditions of being listed for at least 6 months and having 20 trading days, so it will not be included in the Hong Kong Stock Connect in this June adjustment, and is expected to be included in the Hong Kong Stock Connect in August. Key points from CICC: Index adjustments: Hang Seng Index includes BeOne Medicines Ltd, J&T EXPRESS-W, and Aluminum Corporation Of China; Hang Seng Mainland Enterprises Index includes HANSOH PHARMA and AKESO; Hang Seng Technology Index includes KNOWLEDGE ATLAS and Minimax-W. Changes in constituent stocks: BeOne Medicines Ltd (06160), J&T EXPRESS-W (01519), and Aluminum Corporation Of China (02600) are included in the Hang Seng Index; HANSOH PHARMA (03692) and AKESO (09926) are included in the Hang Seng Mainland Enterprises Index, KNOWLEDGE ATLAS (02513) and Minimax-W (00100) are included in the Hang Seng Technology Index. For the Hang Seng Index: This adjustment includes BeOne Medicines Ltd (weight 1.30%), J&T EXPRESS-W (weight 0.30%), and Aluminum Corporation Of China (weight 0.24%), increasing the number of constituent stocks to 93 after the adjustment. For the Hang Seng Mainland Enterprises Index: This adjustment includes HANSOH PHARMA and AKESO, with weights of 0.46% and 0.76% respectively, maintaining the number of constituent stocks at 50 unchanged after the adjustment. For the Hang Seng Technology Index: This adjustment includes KNOWLEDGE ATLAS and Minimax-W, with weights of 0.53% and 0.36% respectively, maintaining the number of constituent stocks at 50 unchanged after the adjustment. Further details on the research report include the estimated fund size of ETFs tracking the Hang Seng Index, Hang Seng Mainland Enterprises Index, and Hang Seng Technology Index, as well as the potential impact that passive fund changes may have on the market. Regarding the performance of KNOWLEDGE ATLAS and Minimax-W after being included in the Hang Seng Technology Index, the report suggests that their performance aligns with expectations and the direction of optimizing the Hang Seng Technology Index to embrace "new technologies." The adjustments in the constituents of the indexes are expected to take effect on June 8th. Active fund managers may engage in arbitrage activities based on the adjustments, while passive funds are likely to rebalance their portfolios on June 5th to minimize tracking errors. The report provides charts and graphs illustrating the changes in industry coverage and sector allocations after the index adjustments.