Hong Kong's dividend sector continued its upward trajectory last week, outperforming the broader market. The Hang Seng Stock Connect China Central SOEs Dividend Total Return Index climbed 1.74%, while the Hang Seng Index and Hang Seng TECH Index rose 0.93% and 0.62% respectively. Among primary sectors, industrials and financials led gains, with materials declining most significantly. (Wind data, through 2025/7/11)

Capital flows showed foreign investment accelerating, with southbound capital maintaining substantial net inflows. EPFR data indicated $102.3 million in foreign net inflows to Hong Kong stocks through Wednesday, expanding from the prior week's $91.6 million. Meanwhile, southbound capital recorded robust net inflows of HKD 26.4 billion.

A pivotal regulatory shift emerged for insurance capital deployment. China's Ministry of Finance recently issued guidelines transforming performance metrics for state-owned insurers. The reform replaces previous assessment parameters—three-year cycle metrics plus annual indicators for net asset returns, and annual metrics for capital preservation—with a new multi-cycle framework. The revised system weights annual indicators at 30%, three-year cycle metrics at 50%, and introduces five-year cycle metrics at 20%. This structural overhaul establishes institutional support for long-term capital allocation, encouraging greater medium-to-long-term equity market participation.

Insurance capital represents a crucial incremental funding source for equities, making its allocation strategy increasingly significant. Following January's multi-ministry directive requiring large state-owned insurers to invest 30% of new premiums in A-shares—potentially channeling hundreds of billions annually—the dividend sector stands to benefit disproportionately. The low-volatility, high-yield characteristics of dividend stocks align well with insurers' liability profiles, particularly against historically low long-term bond yields. This convergence suggests heightened capital allocation toward dividend strategies.

Hong Kong-listed central SOEs offer compelling valuation advantages. The Hang Seng Stock Connect China Central SOEs Dividend Index delivers a 5.86% dividend yield (versus 4.82% for China's CSI Dividend Index) with price-to-book and price-to-earnings ratios of 0.64x and 6.96x respectively. Since early 2021, its total return index has generated 123% cumulative returns, outperforming the Hang Seng Total Return Index by 118 percentage points. (Wind data, through 2025/7/11)

Market outlook remains favorable for dividend strategies amid China's rate-cutting cycle and gradual economic recovery. Central SOEs demonstrate strengthened dividend commitment under market value management requirements, with Hong Kong-listed counterparts offering superior yield advantages and allocation value.

Introducing the Hua An Hong Kong Stock Connect Central SOEs Dividend ETF (513920) This pioneering product tracks the Hang Seng Stock Connect China Central SOEs Dividend Index, uniquely combining Hong Kong exposure, central SOEs, and dividend attributes. Associated feeder funds include Hua An Hang Seng Stock Connect China Central SOEs Dividend ETF Connect A (020866) and Connect C (020867).

Risk Disclosure: This presentation objectively describes current index composition and does not constitute investment advice or performance guarantees. Index methodology and constituent weights may change. Note concentration risks from heavily weighted components.

This equity fund carries higher risk-return characteristics, primarily investing in index constituents. Its feeder funds seek index replication through ETF holdings. Investors should expect greater volatility versus money market, bond, or hybrid funds. Past performance doesn't predict future results. Carefully review fund documents before investing.