After Friday, August 19, 2022, Beijing time, Hang Seng Index will announce the results of the semi-annual review of the Hang Seng Index (the deadline for review is June 30, 2022). These include major flagship indices of Hong Kong stocks such as Hang Seng, state-owned enterprises and Hang Seng Technology, as well as the Hang Seng Composite Index, which is closely related to the investment scope of Hong Kong stocks.

After the index adjustment takes effect on September 5, the Shanghai and Shenzhen exchanges will then (depending on the announcement of the exchange) use this as a basis to adjust the scope of investment targets of the Shanghai-Shenzhen-Hong Kong Stock Connect.

• Potential Hong Kong Stock Connect was added to the list in September.

Everbright Securities has selected the potential list of outgoing Stock Connect in September this year as follows:China Huarong, Haichang Ocean Park, Bohai SilverLine, Conch Environmental Protection, AsiaInfo Technology, Innovation Qizhi, Yunkang Group, Huitongda Network, Xinli International, IDG EnergySource Investment, 361 degrees, Real Group, GOGOX, Hong Kong Aerospace Science and Technology, Datang New Energy, San Nuo Pharmaceutical-B, Dragonair China Real Estate, Dream World, New Special Energy.In addition, companies with different rights of the same shares are expected to be included at different times. ExpectedKE Holdings Inc.-WIt was included in the Hong Kong Stock Connect around December 12.

• 202Potential exclusion list of Hong Kong stocks in September 2002:

Possible elimination list of Hong Kong Stock Connect in September:Cloud Music, Jinke Services, Zhengshang Industry, Xiansheng Pharmaceutical, Jingxin Communications, Greenland Hong Kong, and Platinum Pharmaceutical-B, Chaoyun Group, China Trends, Jiahe Biological-B, Tianli International Holdings, Jianye Real Estate, Jiutai Bonda Energy, Yiju Enterprise Holdings, Huaxia Audio-Visual Education, Pharmaceutical Giant-B.

• How far are the secondary listed companies of Hong Kong stocks from being included in the Hong Kong Stock Connect?

Dual listing needs to meet the management requirements of listed companies in both places at the same time, and the overall requirements are more stringent. Its advantage is that it can be included in the stock exchange of Hong Kong, and to a certain extent, it can reduce the risk of being forced to delist from American exchanges due to political factors. If an enterprise chooses to make a dual major listing in Hong Kong, the rules to be observed should be consistent with those of the initial public offering of shares in Hong Kong.

1、若It does not contain the structure of different rights of the same share, and can be transferred to Hong Kong Stock Connect on the day it is converted to a dual major listed company.In the middle.Referring to the example of Zai Lab Limited, Zai Lab Limited (9688.HK) completed the conversion from a secondary listing to a dual major listing on the main board of the Hong Kong Stock Exchange on June 27, 2022 and was transferred to the Hong Kong Stock Connect on the same day.

2. If there is a different right structure of the same share, as long as it has been listed on the Hong Kong Stock Exchange for more than 6 months + 20 working days, it can also be transferred to the Hong Kong Stock Connect on the day it becomes a dual major listed company.

On October 18, 2019, the Shanghai Stock Exchange and the Shenzhen Stock Exchange simultaneously issued measures for the implementation of the Hong Kong Stock Connect, allowing companies with different voting structures to be included in the Hong Kong Stock Connect. On October 24, 2019, Shenzhen Stock Exchange and Shanghai Stock Exchange at the same time included XIAOMI Group-W and Meituan-W, which have been returning to Hong Kong stocks for more than a year, into the Shenzhen-Hong Kong Stock Connect and Hong Kong Stock Connect. Therefore, companies with different rights of the same shares, such as BABA-SW and Bilibili Inc.-SW, which have been listed in Hong Kong for more than seven months, can also be included in the Hong Kong Stock Connect in the short term after being converted into dual major listed companies.

• Market View and Industry configuration

At present, the domestic economy is still under some pressure. On the one hand, the economy may be coming to an end from the trough hit by the epidemic, there is a lack of motivation for further upward growth, the downward pressure on export growth is still large, it will take time for the real estate industry to repair, and consumer demand is still weak. the strength of infrastructure may be difficult to promote a significant improvement in the economy. On the other hand, there may not be strong policies in the short term. Recently, Premier Li Keqiang also said that "we will not introduce super-large-scale stimulus measures, overissue money, and advance the future for the sake of excessively high growth targets." at the meeting of the political Bureau in July, it was also proposed to "maintain strategic stability." as a result, there may not be more strong incremental policies in the future.

However, short-term risk appetite in the Hong Kong stock market is expected to be repaired.In July, as the epidemic situation in Beijing, Shanghai and other places was brought under control, the offline consumption scene gradually recovered; at the same time, a new round of consumption vouchers were issued intensively in various places since July 18, which increased residents' consumption enthusiasm and accelerated the recovery of consumption. Retail sales of consumer goods totaled 3.9 trillion yuan in June, up 3.1 percent from a year earlier, according to data released by the National Bureau of Statistics. The continued correction in Hong Kong stocks under the influence of the loan cut in July has reflected the market's expectations of the pressure on the domestic economic growth rate compared with the same period last year. In the future, with the resumption of work and production to continue to promote the policy of superimposed stable growth, the short-term risk appetite of the Hong Kong stock market is expected to be repaired.

The policy is good for the market to pick up, and the valuation of the Internet sector is expected to continue to repair.The political Bureau of the CPC Central Committee held a meeting on July 28. With regard to the platform economy, the meeting once again stressed the need to "promote the standardized, healthy and sustainable development of the platform economy, complete the special rectification and reform of the platform economy, and implement regular supervision of the platform economy." and put forward for the first time "focus on the launch of a number of 'green light' investment cases". "focus on the launch of a number of 'green light' investment cases" is a clearer and clearer expression of "supportive specific measures", and the attitude of regulation to support the economic development of the platform is stronger.

New business type, a cloud digital economy based on BABA's digital platform, has gradually taken shape, and the efficiency of business research and development and resource utilization have been greatly improved. at the same time, BABA has applied for a dual listing in Hong Kong shares, and the capital is expected to be expanded. Tencent continues open source cooperation in core technology and has opened up more than 160 projects, which is expected to promote the development of the industry. In terms of policy orientation, the ecological conference of China's industrial Internet industry has been held, and a number of policies and concepts related to the digital economy have been put forward nationwide, and the development of the industry as a whole is expected to make a breakthrough in the future.

Automotive industry to maintain a high demeanor, automotive electronics is expected to continue to benefit.At present, the domestic photovoltaic and new energy vehicle plate continues to expand. Production and sales figures released by Guangzhou Automobile Group in June showed that the output of new energy vehicles reached 26800, an increase of 190.17 per cent over the same period last year, and sales reached 26700, an increase of 172.6 per cent over the same period last year. The downstream demand of automotive electronics is strong, while the middle and high end of domestic automotive chip manufacturers have gradually achieved mass production breakthroughs, and the surging demand in the second half of 2022 is expected to pull automotive electronics and other chip segments to continue to strengthen.

To sum up, the allocation of the Hong Kong stock industry is recommended to pay attention to:1) Internet technology stocks with low valuation and cost-effective allocation under the continuous warming of platform economic policy. 2) Automotive electronics with high magnanimity and increased demand. 3) the building materials that benefit from the stable growth policy and the property management companies with obvious valuation performance-to-price advantages.

Risk analysis:The calculation method of this paper may be different from the actual calculation method of Hang Seng Company. the rule changes of Hang Seng Company and the rules of the mainland exchange may lead to the difference between our predicted inclusion target and the actual one.