A 'Hong Kong AI Rerating' narrative is gaining serious momentum in the market.
At the heart of this story are two AI unicorns, Zhipu AI and MiniMax, and the growing expectation that they will be included in the Hang Seng Tech Index (HSTECH) as early as June 8th. This isn't just a routine index change; it's seen as a potential cure for an index that has been struggling. The HSTECH, heavily weighted with 'old guard' internet companies, has significantly underperformed and failed to capture the explosive growth of newly listed AI giants. After Zhipu and MiniMax surged over 500% post-IPO in January, the pressure mounted for the index to better reflect the new tech landscape.
So, what makes this inclusion so significant? It's all about the predictable flow of money it could trigger.
First, upon inclusion, a wave of passive capital is expected to flow in. Exchange-Traded Funds (ETFs) that track the HSTECH, with assets under management totaling over HK$56.5 billion, would be mechanically required to buy shares of Zhipu and MiniMax to match the index's new composition. Conservative estimates place this initial inflow at around US$220 to $430 million.
Second, this is likely just the beginning. Inclusion in the HSTECH is often a stepping stone to being added to the broader Hang Seng Composite Index (HSCI). This is a critical prerequisite for the final, and potentially largest, step.
Third, once part of the HSCI and after a stabilization period, these stocks could become eligible for the Southbound Stock Connect program. This would open the floodgates for a massive pool of capital from mainland Chinese investors, who have shown a strong appetite for leading tech companies. This sequential flow—from passive index funds to active mainland investors—is the core of the rerating thesis.
However, a major test is fast approaching. The 180-day post-IPO lock-up period for both companies is set to expire in early July. This could release a substantial volume of shares held by early investors and insiders onto the market, creating significant selling pressure. How the stocks absorb this supply shock will be a crucial test of their lofty valuations and the market's conviction in the long-term AI story. Other risks, like an ongoing IP lawsuit against MiniMax in the U.S., also linger in the background.
In essence, the market is pricing in a multi-stage rerating story fueled by index mechanics. While the path for capital inflow is clear, the journey will likely face significant volatility, with the July lock-up expiration serving as the first major hurdle.
- Glossary -
- Hang Seng Tech Index (HSTECH): A stock market index that tracks the 30 largest technology companies listed in Hong Kong.
- Southbound Stock Connect: A channel that allows qualified mainland Chinese investors to trade eligible shares listed in Hong Kong.
- Lock-up Period: A contractually agreed period of time following an IPO during which insiders and early investors are not allowed to sell their shares.