(Bloomberg) — China’s hottest AI stocks may be among candidates for inclusion in Hong Kong stock gauges, opening access to trading links that may trigger billions of dollars in inflows.
Knowledge Atlas Technology Joint Stock Co., known as Zhipu, and MiniMax Group Inc. are viewed as leading contenders for inclusion into the Hang Seng Tech and composite gauges when Hang Seng Indexes Co. conducts its quarterly review on Friday, after large gains in their market capitalizations, analysts said. Both stocks have rallied at least 300% each since listing in January.
An entry into the indexes would make Zhipu eligible for the stock connect program as early as June 8 under fast-entry rules. MiniMax may qualify in August given stricter requirements on firms with weighted voting rights. Bloomberg Intelligence estimated that Zhipu may attract southbound buying of HK$51 billion ($6.5 billion) to HK$92 billion, while MiniMax could see flows of up to HK$47 billion.
“Southbound demand could become a key support over time, as A-shares have few pure AI-model stocks,” said Jason Liao, an analyst at Bloomberg Intelligence. Mainland investors typically build stakes of 11% to 20% in major Hong Kong tech firms through trading links, and both stocks may attract similar levels of capital, he said.
If added, their combined weighting in the tech measure could be around 9%, according to Bloomberg Intelligence. Inflows from mainland investors, along with potential exchange-traded fund buying of about $4 billion, could help offset selling pressure ahead of share lockup expiries in July.
Only 5% of MiniMax’s total stock is freely tradable, with 65% of total shares to be available to the market in July, according to HSBC Holdings Plc estimates. For Zhipu, about 6% of total shares will be released from lock-up in July, and another 40% at the end of January.
For the broader Hang Seng Index, BeiGene Ltd., KE Holdings Inc., Zhaojin Mining Industry Co. and Yum China Holdings Inc. may be considered for addition, said Willer Chen, an analyst at Mizuho Securities. Meanwhile, Akeso Inc. may join the Hang Seng China Enterprises Index and Sunny Optical Technology Group Co. may be removed, he said.
Joining the tech gauge may put Zhipu and MiniMax on a path toward inclusions into other global and local indexes, said Brian Freitas, an analyst at Smartkarma.
“The first lockup expiry in July should increase float significantly,” he said. “The lockup expiry in January will bring more index inclusions and flows.”
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