HK Connect Weekly: HSTECH falls 0.77% for the week as Hang Seng Index quarterly review takes effect and Baidu completes dual primary listing - 20260904
I. Weekly Market Overview
During the week (31 August to 4 September), the three major Hong Kong indices diverged: the Hang Seng Index rose 0.26% for the full week to close at 25,650.87 points; the Hang Seng TECH Index fell 0.77%; and the Hang Seng China Enterprises Index rose 0.76%. Average daily turnover was about HK$ 246.6 billion, indicating active trading.
Southbound flows alternated between inflows and outflows during the week: net buying of HK$ 2.139 billion on Monday (31 August), HK$ 7.757 billion on Tuesday (1 September), HK$ 4.093 billion on Wednesday (2 September) and HK$ 3.395 billion on Thursday (3 September), followed by net selling of HK$ 10.021 billion on Friday (4 September). Net southbound inflows totalled approximately HK$ 7.363 billion for the week.
II. Weekly Sector Review
1. Quarterly index review takes effect; Goldman Sachs sees USD 870 million of passive inflows into tech hardware
The Hang Seng Index family quarterly review was implemented this week, with all changes effective after the close on 4 September and new constituents formally included in index operations from 7 September. The Hang Seng Index added Hua Hong Grace (01347.HK) and (02338.HK), lifting the constituent count from 93 to 95; the Hang Seng TECH Index added Iluvatar CoreX (09903.HK) and removed Tongcheng Travel (00780.HK); and the Hang Seng Composite Index expanded from 534 to 580 constituents. Goldman Sachs expects the index changes to generate over USD 7.2 billion in total two-way passive fund flows, with tech hardware and semiconductors likely to record the largest passive inflows of about USD 870 million.
The MSCI China Index quarterly review took effect on Monday, adding Z.AI (02513.HK) and Kingboard Holdings (00148.HK) while removing seven Hong Kong stocks. By market capitalisation, Z.AI is the largest company among the new constituents added to the MSCI Emerging Markets Index in this review.
Lifted by the effective index reviews, the affected constituents traded actively through the week. On Friday, the AI application sector led gains: PHANCY (06682.HK) rose 14.66% and MARKETINGFORCE (02556.HK) rose 13.52%, as OpenAI released GPT-6 Astra and market pricing logic shifted from computing-power supply to application monetisation. Mainland property developers extended gains, with SUNAC (01918.HK) up 14.29% and LONGFOR GROUP (00960.HK) up 8.4% after the "828" property policy systematically restructured industry rules. Innovative drug names rallied broadly, with AKESO (09926.HK) up 11.45%.
2. Baidu completes dual primary listing; Stock Connect inclusion expectations build
On Tuesday (1 September), Baidu Group (09888.HK) announced that its voluntary conversion from a secondary listing to dual primary listing on the Stock Exchange of Hong Kong had formally taken effect and that the "S" marker had been removed from its stock short name. Baidu is now dual primary listed on the HKEX and the Nasdaq Global Select Market. Based on the current rules and observation periods, market analysis suggests Baidu could be included in Stock Connect as early as 7 September. Baidu's chief financial officer said that, based on past cases, southbound flows could materialise within a few days to a week, and estimated incremental inflows of 10% to 15%. Morgan Stanley expects southbound inflows of USD 3 billion to USD 6.8 billion in the first 6 to 12 months after inclusion. Baidu rose 5.34% on Tuesday as inclusion expectations continued to build.
Separately, according to market reports, leading domestic large-model developer Moonshot AI confidentially filed its A1 application with the HKEX this week, formally starting its Hong Kong IPO process, and is advancing a new funding round at a pre-investment valuation of USD 50 billion. If it lists successfully, it could become a potential Stock Connect target.
3. AI application sector: OpenAI's GPT-6 Astra release ignites the market
On Friday, driven by OpenAI's release of GPT-6 Astra, the AI application sector led the whole market: PHANCY (06682.HK) rose 14.66% and MARKETINGFORCE (02556.HK) rose 13.52%, as pricing logic shifted from computing-power supply to application monetisation. AI application names had already shown strength earlier in the week, with MININGLAMP-W (02718.HK) up 21.25% and HAIZHI TECH GP (02706.HK) up 12.92% on Monday, after the Ministry of Industry and Information Technology launched a special initiative to cultivate AI application service providers.
4. Innovative drugs/CRO sector: HUTCHMED and GSK reach a major licensing deal; active all week
The innovative drug sector stayed active throughout the week. On Monday, MINIMAX-W (00100.HK) rose 16.18% and Z.AI (02513.HK) rose 9.63%. On Wednesday, the innovative drug theme broke out: HUTCHMED (00013.HK) rose 14.32% after reaching a licensing deal with GSK on novel cancer therapies, with an upfront payment of USD 110 million and potential milestones of up to nearly USD 1.3 billion; SBP GROUP (01177.HK) rose 6.27%; XUANZHUBIO-B (02575.HK) spiked over 40% intraday before closing up 18.23%; BIOCYTOGEN-B (02315.HK) rose 11.52%; and SIMCERE PHARMA (02096.HK) rose 7.64%. On Thursday the theme extended gains, with XUANZHUBIO-B (02575.HK) up 18.23%; on Friday AKESO (09926.HK) rose 11.45%.
On Friday, the semiconductor sector's sharp decline dragged related innovative drug names: GENSCRIPT BIO (01548.HK) fell 13.33% after the company proposed spinning off Probio Technology Limited for a separate listing on the HKEX.
5. Semiconductors: sharp divergence as Hua Hong Grace joins the HSI yet tumbles
The semiconductor sector diverged sharply this week. On Monday, Z.AI (02513.HK) rose 9.63% and MINIMAX-W (00100.HK) rose 16.18%. On Wednesday, FTSE Russell announced quarterly review changes to the FTSE China 50 Index, adding Hua Hong Grace (01347.HK) and Montage Technology (06809.HK) and removing Kuaishou-W (01024.HK) and SF Holding (06936.HK), with the changes effective after the close on 18 September.
On Friday, however, the sector tumbled against the trend: Hua Hong Grace (01347.HK) fell 8.43% on turnover of HK$ 6.261 billion with net southbound selling of HK$ 753 million; Montage Technology (06809.HK) fell 3.22%; SMIC (00981.HK) fell 1.25% with net southbound selling of HK$ 904 million; and KB Laminates (01888.HK) fell 5.27%.
6. Gold: strengthens against the trend as soft ADP data eases rate-hike expectations
On Wednesday, gold and other non-ferrous metals strengthened against the trend: Tongguan Gold (00340.HK) rose 9.2% and Lingbao Gold (03330.HK) rose 5.75%, after soft US ADP employment data eased rate-hike expectations. China Gold International (02099.HK) was selected for inclusion in the Hang Seng High Beta Index and the Hang Seng SCHK Central SOEs Quality Index, effective 7 September.
7. Other sector highlights
Chinese banking H-shares: active against the trend on Monday, with the ICBC, Bank of China, CCB and BOCOM H-shares all hitting record highs and the six major state-owned banks collectively raising cash dividend payout ratios to 31% for the first time. Mainland property developers opened higher but closed lower on Monday: Greentown China (03900.HK) fell 17.58% and SUNAC (01918.HK) fell 10.37%, pressured by the new property credit reform policy.
Mainland property developers: extended gains on Friday on the "828" property policy, with SUNAC (01918.HK) up 14.29%.
Shipping stocks: outperformed on Wednesday, with COSCO SHIP ENGY (01138.HK) up 6.49% as geopolitical disruptions supported the risk premium on crude tanker shipping.
Pork sector: strengthened on Thursday, with Muyuan (02714.HK) up 9.21% as the national average hog price rebounded nearly 17% from its June low.
Tech/internet names: fell broadly on Monday, with Alibaba (09988.HK) down 3.33% while Kuaishou-W (01024.HK) rose 3.16% against the trend after Kling AI received RMB 1.4 billion of investment from the National Artificial Intelligence Fund. They rebounded broadly on Friday.
SHEIN-W (00625.HK): broke below its offer price on its debut on Tuesday and kept weakening through the week, falling 8.7% to a fresh low on Wednesday and a further 9.19% on Thursday.
Mech-Mind Robotics (09615.HK): broke below its offer price on its debut on Tuesday.
III. Key Stock Connect Events
1. Baidu completes dual primary listing; inclusion in Stock Connect possible as early as 7 September
On Tuesday (1 September), Baidu Group (09888.HK) announced that its voluntary conversion from a secondary listing to dual primary listing on the HKEX had formally taken effect. Based on current rules and observation periods, market analysis suggests Baidu could be included in Stock Connect as early as 7 September. Morgan Stanley expects southbound inflows of USD 3 billion to USD 6.8 billion in the first 6 to 12 months after inclusion.
2. Zhongji Innolight plans to buy back RMB 4 billion to RMB 8 billion of A-shares
On Tuesday (1 September), Zhongji Innolight (03308.HK) announced plans to repurchase A-shares with its own funds or self-raised funds, with total buy-back funds of no less than RMB 4 billion and no more than RMB 8 billion and a buy-back price ceiling of RMB 1,200 per share. The repurchased shares will be used for share incentive schemes or employee stock ownership plans. Zhongji Innolight was formally added to the Stock Connect list of eligible southbound securities on 27 August.
3. Hang Seng Index quarterly review takes effect; Goldman Sachs sees USD 870 million of passive inflows into tech hardware
On Friday (4 September), the Hang Seng Index family quarterly review was formally implemented, with all changes effective after the close that day. Goldman Sachs expects the index changes to generate over USD 7.2 billion in total two-way passive fund flows, with tech hardware and semiconductors likely to record the largest passive inflows of about USD 870 million.
4. MSCI China Index review takes effect: Z.AI and Kingboard Holdings added
After the close on Monday (31 August), the MSCI China Index quarterly review took effect, adding 33 stocks in total, including two Hong Kong stocks, Z.AI (02513.HK) and Kingboard Holdings (00148.HK), along with 31 A-shares. Seven Hong Kong stocks were removed: China Power (02380.HK), China Ruyi (00136.HK), GCL Technology (03800.HK), Hesai-W (02508.HK), Kingdee International (00268.HK), Pony-W (02026.HK) and Xinyi Solar (00968.HK).
5. FTSE China 50 Index quarterly review: Hua Hong Grace and Montage Technology added
On Wednesday (2 September), FTSE Russell announced quarterly review changes to the FTSE China Index Series. The FTSE China 50 Index added Hua Hong Grace (01347.HK) and Montage Technology (06809.HK) and removed Kuaishou-W (01024.HK) and SF Holding (06936.HK), with the changes effective after the close on 18 September.
6. IPO progress of several companies
SHEIN-W (00625.HK): debuted on 1 September at a final offer price of HK$ 48.56 and closed below the offer price on day one.
Mech-Mind Robotics (09615.HK): debuted on 1 September at a final offer price of HK$ 101.7 and closed below the offer price on day one.
Medcaptain Medical (02041.HK): its public offering was oversubscribed by over 437 times; listing is expected on 7 September.
Excelland Robotics (03231.HK): closed its subscription on 4 September, with margin financing oversubscribed 94.79 times and SenseTime-W (00020.HK) and 58.com acting as cornerstone investors; listing is expected on 9 September.
Longsys (09976.HK): set the H-share offer price at HK$ 236; listing is expected on 8 September.
7. Haichang Holding to be removed from Stock Connect
Under the Hang Seng Indexes Company's semi-annual index review results, Haichang Holding (02255.HK) was removed from the Hang Seng Composite Index, with the change implemented after the close on 4 September and effective from 7 September, when the stock will be excluded from Stock Connect.
8. GenScript Biotech applies to spin off Probio Technology for separate HKEX listing
On Friday (4 September), GenScript Biotech (01548.HK) announced a proposal to spin off its indirect non-wholly-owned subsidiary Probio Technology Limited for a separate listing on the Main Board of the Stock Exchange of Hong Kong and has submitted an application to the HKEX. Upon completion of the spin-off, GenScript will continue to hold a controlling interest in Probio Technology. GenScript fell 13.33% on Friday.
9. STAR SHINE HLDG included in Hang Seng Composite Index, turns profitable in H1
STAR SHINE HLDG (01440.HK) was included in the Hang Seng Composite Index, effective 7 September. The company posted revenue of RMB 163 million in the first half, with profit attributable to owners of the company of RMB 24.249 million versus a loss of RMB 22.511 million in the same period last year, turning profitable year on year. Following its inclusion in the Hang Seng Composite Index, STAR SHINE HLDG may become a Stock Connect eligible security.
IV. Stock Connect-related A-share ETF Rankings (Weekly Focus)
This week, Stock Connect-related A-share ETFs showed a pattern of persistently active innovative drug ETFs, divergent tech ETFs and stronger financial ETFs.
Innovative drug ETFs traded actively all week. On Monday, the China Universal CNI HK Equities Innovative Drugs ETF (159570) turned over RMB 2.504 billion, down 3.53%. On Tuesday it turned over RMB 1.817 billion, down 1.31%. On Wednesday, driven by the CRO/innovative drug theme, it turned over RMB 2.194 billion, up 0.28%, while the Yinhua CNI HK Equities Innovative Drugs ETF (159567) turned over RMB 701 million, up 0.43%. On Thursday, as the innovative drug theme broke out, the China Universal CNI HK Equities Innovative Drugs ETF (159570) turned over RMB 2.142 billion, up 3.35%; the Yinhua CNI HK Equities Innovative Drugs ETF (159567) turned over RMB 1.010 billion, up 2.88%; and the Invesco Great Wall CSI HK Equities Innovative Drugs ETF (513780) turned over RMB 678 million, up 3.17%. On Friday, the China Universal CNI HK Equities Innovative Drugs ETF (159570) turned over RMB 1.857 billion, up 0.81%.
Information technology ETFs moved in lockstep with the semiconductor sector this week. On Monday, the Hwabao CSI HK Equities Information Technology Integration ETF (159131) turned over RMB 1.297 billion, up 1.33%. Turnover was RMB 972 million, down 0.91% on Tuesday; RMB 1.133 billion, down 1.22% on Wednesday; RMB 1.571 billion, down 0.21% on Thursday; and RMB 1.488 billion, up 0.31% on Friday. The ChinaAMC CSI HK Equities Information Technology Integration ETF (526000) turned over RMB 385 million on Friday with a turnover rate of 180.26%.
Financial ETFs outperformed this week, lifted by stronger Chinese banking and brokerage stocks. On Monday, the ChinaAMC CSI HK Equities Interior Finance ETF (513190) rose 1.82% on turnover of RMB 611 million; on Tuesday it rose 2.17% on turnover of RMB 577 million, while the GF CSI HK Connect Financials (ex Banks) Thematic ETF (513750) rose 1.29% on turnover of RMB 627 million. On Wednesday, the ChinaAMC CSI HK Equities Interior Finance ETF (513190) turned over RMB 534 million, down 0.95%. On Friday, the GF CSI HK Connect Financials (ex Banks) Thematic ETF (513750) rose 1.81% on turnover of RMB 1.058 billion.
Internet ETFs were broadly range-bound this week. The Fullgoal CSI HK Equities Internet ETF (159792) turned over RMB 1.450 billion on Monday, down 0.69%; RMB 1.464 billion on Tuesday, down 0.52%; RMB 1.237 billion on Wednesday, down 1.05%; and RMB 1.081 billion on Thursday, down 1.60%. On Friday, driven by the AI application sector breakout, it jumped 3.24% on turnover of RMB 2.721 billion.
Overall, the capital flows in the ETF market this week were clear: a tiered heat structure of innovative drug ETFs, internet ETFs, financial ETFs and information technology ETFs, in descending order, ran through the whole week. The innovative drug sector stayed highly active, catalysed by the HUTCHMED-GSK licensing deal; internet ETFs rebounded sharply on Friday on the AI application sector breakout; financial ETFs were lifted by stronger Chinese banking and brokerage stocks; and information technology ETFs were pressured overall by the sharp divergence in semiconductors.
V. Market Memo
Eligible list changes: 0 securities were added and 0 removed this week. The Hang Seng Index quarterly review took effect after the close on 4 September. The Hang Seng Index added Hua Hong Grace (01347.HK) and Weichai Power (02338.HK); the Hang Seng TECH Index added Iluvatar CoreX (09903.HK) and removed Tongcheng Travel (00780.HK); and the Hang Seng Composite Index expanded from 534 to 580 constituents. The MSCI China Index review took effect after the close on 31 August, adding Z.AI and Kingboard Holdings and removing 7 Hong Kong stocks.
Preview of the effective Hang Seng Index quarterly review: all changes were implemented after the close on Friday (4 September) and new constituents will be formally included in index operations from Monday (7 September). Hua Hong Grace and Weichai Power will then be formally included in the Hang Seng Index, and Iluvatar CoreX in the Hang Seng TECH Index. Baidu could be included in Stock Connect as early as 7 September, while Haichang Holding will be removed from Stock Connect on the same day.
Trading calendar: no market closures are approaching.
VI. Weekly Wrap-up
Hong Kong equities diverged this week, with the HSI up 0.26% and the HSTECH down 0.77% for the week. The market's core narrative centred on the effective Hang Seng Index quarterly review and other index adjustments: the Hang Seng Index added Hua Hong Grace and Weichai Power, the Hang Seng TECH Index added Iluvatar CoreX, and Goldman Sachs expects USD 870 million of passive inflows into tech hardware and semiconductors; the MSCI China Index added Z.AI and Kingboard Holdings; and the FTSE China 50 Index added Hua Hong Grace and Montage Technology. Baidu completed its dual primary listing and could join Stock Connect as early as 7 September, with Morgan Stanley expecting southbound inflows of USD 3 billion to USD 6.8 billion after inclusion. The AI application sector led the market on Friday, catalysed by OpenAI's GPT-6 Astra release. The innovative drug sector stayed active all week, boosted by the major licensing deal between HUTCHMED and GSK. Semiconductors diverged sharply, with Hua Hong Grace tumbling 8.43% despite its HSI inclusion, and GenScript Biotech falling 13.33% on the spin-off of Probio Technology.
On the connect mechanism front, several milestones arrived this week: the Hang Seng Index quarterly review took effect, with new constituents joining index operations from 7 September; Baidu completed its dual primary listing and could join Stock Connect as early as 7 September; the MSCI China Index review took effect, adding Z.AI and Kingboard Holdings; the FTSE China 50 Index added Hua Hong Grace and Montage Technology; and Haichang Holding will be removed from Stock Connect from 7 September. These developments show Hong Kong's equity market deepening its index compilation and connect mechanisms, with a rising weight for technology attributes and AI themes.
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