Inspired by Benjamin Graham, the "father of value investing," Hang Seng Index Company selected a basket of value stocks with seven criteria from the Hong Kong market (represented by the Hang Seng Composite Index) for analysis. These criteria include quality, financial leverage, liquidity, profit growth, P/E ratio, P/B ratio, and dividend payouts. Looking at ten years of backtesting, the dynamic basket of value stocks (market cap weighted) yielded an annualized total return 8.6 percentage points higher than the market, suggesting that Graham's investment philosophy may still be applicable to today's Hong Kong stock market and generate alpha returns.

Among the 36 value stocks in the basket (excluding financial stocks), as of July 19, their weightings in the non-financial component of the Hang Seng Index and the H-share Index were 18% and 19%, respectively. For investors seeking benchmarks to evaluate Hong Kong blue chips, the Hang Seng Index is an ideal choice; as for the mainland market, the Hang Seng H-Share Index ETF can gauge the overall performance of mainland companies listed in Hong Kong.

The basket of value stocks contains 36 value stocks:

Alibaba (09988.HK)

CNOOC (00883.HK)

China Shenhua Energy (01088.HK)

Kunlun Energy (00135.HK)

Cosco Shipping Holdings (01919.HK)

China Feihe (06186.HK)

OOIL (00316.HK)

Yancoal Australia (03668.HK)

3SBio (01530.HK)

Pacific Basin (02343.HK)

Zhongsheng Holdings (00881.HK)

Weigao Group (01066.HK)

AVIC International (02357.HK)

CMS (00867.HK)

Yuexiu Property (00123.HK)

United Lab (03933.HK)

Chin FMinig (01258.HK)

Zoomlion (01157.HK)

Shougang Resource (00639.HK)

Flat Glass (06865.HK)

Luk Fook Group (00590.HK)

Shanghai Industrial Holdings Limited (00363.HK)

CIMC Enric Holdings Limited (03899.HK)

Sinopec Kantons Holdings Limited (00934.HK)

Pax Global Environmental Markets Group Limited (00327.HK)

COFCO International Limited (00081.HK)

JIUMAOJIU International Holdings Limited (09922.HK)

361 Degrees International Limited (01361.HK)

ASIAINFO Technologies Limited (01675.HK)

EEKA Fashion Holdings Limited (03709.HK)

Tiangong International Company Limited (00826.HK)

Shineway Pharmaceutical Group Limited (02877.HK)

Theme International Holdings Limited (00990.HK)

BOE Varitronix Limited (00710.HK)

Nissin Foods Company Limited (01475.HK)