GF SEC September Hong Kong Stock Connect and Hengkang Portfolio Adjustment List Prediction: 38 companies may be included in the Hong Kong Stock Connect, ILUVATAR COREX (09903) is expected to be included in Hengkang.

GF SEC released a research report stating that as of September, calculations regarding the adjustments to the Hong Kong Stock Connect and the Hang Seng Technology Index suggest that 38 companies are expected to gain eligibility for trading through the Hong Kong Stock Connect, with ILUVATAR COREX (09903) likely to be included in the Hang Seng Technology Index. In terms of the Hong Kong Stock Connect, it is expected that 37 companies will be included through regular adjustments on September 7, with candidate companies mainly concentrated in the technology, advanced manufacturing, and pharmaceutical sectors. Regarding the Hang Seng Technology Index, the quarterly review for September will still apply the current rule of 30 constituent stocks; should ILUVATAR COREX be finally included, there will be a corresponding elimination. The final list will still need to be confirmed by the relevant institutions' announcements. GF SEC's main points are as follows: Patterns before and after inclusion in the Hong Kong Stock Connect: Observing historical samples since 2021, stock prices of companies included in the Hong Kong Stock Connect did not exhibit a stable upward trend. Overall sample data shows that the probability of price increases the day after inclusion, one week later, and two weeks later are 48%, 46%, and 45%, respectively, all around fifty percent; after one month, it slightly rises to 48%, indicating that the overall increase is not significant. Therefore, the event of inclusion itself does not constitute a clear signal for price increases; its influence is more reflected in the expansion of the investor base and the potential channels for capital. For the current round of candidate companies, future trends will still need to fully consider actual increases in southbound capital, changes in company fundamentals, and market conditions for a comprehensive judgment. Adjustment effects in the Hang Seng Technology Index: Typically, there will be an increase one month prior to the adjustment. In historical samples, included companies experienced an average increase of about 9.9% from T-30 to T-10, while eliminated companies suffered an average decrease of about 10.4% from T-30 to the official effective date. After the official implementation, both the included and excluded samples experience a short-term pullback. The relatively stable pattern of adjustment in the Hang Seng Technology Index is not characterized by sustained increases after inclusion and sustained decreases after exclusion, but rather by early anticipatory trading, with capital progressively cashing out after the effective date, leading prices to revert to market and fundamental valuations. How to view the revised plan for the Hang Seng Technology Index and the latest predictions for the list after implementation? The core of the reform for the Hang Seng Technology Index is to expand the coverage of broader technology, and introduce income growth dimensions beyond market capitalization selection. The consulting proposal aims to eliminate five designated industry restrictions, instead identifying candidate companies based on exposure to technology-themed business; the number of technology sub-themes will increase from 16 to 24, with artificial intelligence upgraded to a primary theme. At the same time, it is proposed to increase the number of constituent stocks from 30 to 50, forming a dual stock selection mechanism of 40 stocks based on market capitalization + 10 stocks based on income growth to improve coverage of medium-cap, high-income growth technology companies. The reform will enhance the index's representation in technology sectors such as artificial intelligence, advanced hardware, and Siasun Robot & Automation, but changes to the index attributes are expected to be gradual rather than sudden. In simulation results, the number of advanced hardware constituent stocks increased from 5 to 15, artificial intelligence from 3 to 6, while the proportion of digital platform and solution numbers decreased from 46% to 28%; however, the total weight of the original 30 constituent stocks remains at 88.5%. In the short term, attention should be focused on the passive allocation demand of the newly added companies, while in the medium to long term, the Hang Seng Technology Index is expected to gradually become a comprehensive benchmark for covering the platform economy, artificial intelligence, advanced manufacturing, and cutting-edge technology in Hong Kong stocks. Risk warnings: There may be deviations between the predicted list and the actual results; the reform plan for the Hang Seng Technology Index is still in the consultation phase; there are differences between passive capital estimates and actual adjustment scales; and market fluctuations may obscure the price impact of the adjustment events themselves.