20220215-招银国际-Strategy_Report_Preview_of_new_blue_chips___Southbound_stocks_6页_791kb

Summary of Strategy Report

Core Content

This report discusses the expected changes to the Hang Seng Index (HSI) and Southbound eligible stocks following the 2021 Q4 review of the Hang Seng Family of Indexes, which will be announced after market close on 18 Feb 2022 and take effect from 7 Mar 2022. The focus is on the addition of new blue chip constituents and the potential adjustments to Southbound trading eligibility.

Main Points

New HSI Constituents

• Number of New Constituents: The HSI Company is expected to add 3-4 new stocks in this review, continuing its trend of gradual expansion.
• Industry Focus: The new additions are likely to come from the Consumer and IT sectors, which are still under-represented in the HSI.
• Prudent Selection: The HSI Company emphasized prudent selection over speed, which means no loss-making stocks (including Healthcare stocks like Hansoh Pharma and large caps like Kuaishou or JD Logistics) are expected to be added at this stage.
• Likely Inclusions: The top candidates for inclusion are:
  • Baidu (9888 HK)
  • Smoore (6969 HK)
  • Nongfu Spring (9633 HK)
  • SMIC (981 HK)
• Dark Horses: Potential additions with lower likelihood include:
  • China Feihe (6186 HK)
  • Zhongsheng (881 HK)
  • China Gas (384 HK)

No Removals Expected

• The report does not expect any removals of existing HSI constituents in this review.

Southbound Eligible Stocks

• This review also affects Southbound eligible stocks under the Stock Connect program.
• Potential Additions: 17 stocks may be added to Southbound trading, including:
  • Li Auto (2015 HK)
  • GCL-Poly Energy (3800 HK)
  • MicroPort MedBot - B (2252 HK)
  • Cloud Village (9899 HK)
  • Chervon Holdings (2285 HK)
  • LK Tech (558 HK)
  • Clover Bio - B (2197 HK)
  • Keymed Bio - B (2162 HK)
  • China Nonferrous Mining (1258 HK)
  • Golden Solar New Energy (1121 HK)
  • EC Healthcare (2138 HK)
  • Differ Group (6878 HK)
  • ANE (9956 HK)
  • Theme Int'l (990 HK)
  • Gushengtang (2273 HK)
  • Global New Material (6616 HK)
  • Bairong-W (6608 HK)
• Potential Removals: Some stocks may be removed from Southbound trading due to:
  • Market cap dropping below HK$5bn
  • Potential removal from the HSCI due to falling out of the top 96% of cumulative market value on HKEX

Key Information

• The HSI Company is focused on maintaining a balanced representation across industries, particularly Consumer and Healthcare.
• The HSI is a benchmark index that reflects the performance of the Hong Kong stock market, with a focus on size, liquidity, and financial fundamentals.
• Market data highlights the current performance of the HSI, HSCEI, and HSTECH indices over different time horizons.
• The report also lists related strategy reports that provide further context and analysis on the Hong Kong market and broader economic factors.

Conclusion

The HSI review aims to enhance index representativeness and diversification without compromising on the quality of constituents. The cautious approach to selection ensures that only financially sound and liquid stocks are added, with a particular focus on under-represented sectors. Meanwhile, changes to Southbound eligible stocks will affect the flow of capital between mainland China and Hong Kong, with both additions and potential removals based on market cap and index inclusion criteria.