Market Review and Key Observations:

Last week, the Hang Seng Southbound Connect China SOE Dividend Index increased by 0.33%, while the Hang Seng Index rose 0.98% and the Hang Seng Tech Index climbed 1.57%. On the A-share side, the CSI SOE Dividend Index gained 0.68% over the same period, compared to a 1.15% rise in the CSI 300 Index. (Data source: Wind, as of July 27, 2026, using total return index performance.)

Over the past five trading days, ETFs tracking Southbound Connect SOE dividends have seen substantial net capital inflows. Against a backdrop of increased market volatility and declining risk appetite, a clear rotation of capital from high-valuation tech sectors toward lower-valuation dividend-paying sectors is emerging.

On the macroeconomic front, the domestic low-interest-rate environment persists, with the 10-year government bond yield hovering near 1.7%. This, combined with a tepid economic recovery that fuels a quest for stable returns, continues to strengthen the relative appeal of high-dividend-yield assets.

The Hang Seng Southbound Connect China SOE Dividend Index currently offers a dividend yield exceeding 5%. The wide spread between this yield and the risk-free rate provides ample margin of safety for capital allocation. In the near term, the defensive characteristics and allocation value of this index are expected to gain further market recognition.

Constituent stocks of the Hang Seng Southbound Connect China SOE Dividend Index are primarily concentrated in traditional high-dividend sectors such as banking, shipping and ports, insurance, and conventional power generation. Additionally, segments like telecommunications services, heavy infrastructure, and gas supply also hold notable positions. These industries are generally characterized by ample cash flow, strong earnings stability, and a pronounced willingness to distribute dividends, making them representative of a classic high-dividend strategy. In a low-interest-rate environment, the dividend income from such assets offers a significant yield advantage over bond coupons, highlighting their long-term allocation value. Consequently, the index's dividend yield remains steadily above 5%, providing investors with considerable cash returns.

Higher Dividend Yield, Lower Valuation for SOE Dividends via Southbound Connect:

The Hang Seng Southbound Connect China SOE Dividend Index boasts a dividend yield of 5.34% (vs. 4.31% for the CSI Dividend Index), with a price-to-book (PB) ratio of 0.59 and a price-to-earnings (PE) ratio of 7.09. Its total return index has accumulated a gain of 143% over the past five years, outperforming the Hang Seng Total Return Index by a significant 128%. Meanwhile, the CSI SOE Dividend Index offers a dividend yield of 4.26%, with a PB of 0.86 and a PE of 8.91. Its five-year total return index has accumulated a gain of 53%, yielding an excess return of 45% over the CSI 300 Total Return Index. (Data source: Wind, as of July 27, 2026.)

Outlook and Strategic Considerations:

Looking ahead, the low-interest-rate environment under the domestic rate-cutting cycle and the backdrop of a weak economic recovery are both favorable for a dividend strategy. Under the guidance of market value management, central and state-owned enterprises (SOEs) demonstrate strong willingness and capability to increase dividends. Against this landscape, the Southbound Connect SOE Dividend ETF managed by Hua An (513920) and the SOE Dividend ETF managed by Hua An (561060) present notable allocation value.

Product Introduction: Hua An Southbound Connect SOE Dividend ETF (513920)

The Hua An Southbound Connect SOE Dividend ETF (513920) is the first ETF in the market to combine the three attributes of Hong Kong stocks, SOEs, and dividends. It is also the largest ETF tracking the Hang Seng Southbound Connect China SOE Dividend Index (HSSCSOY). This index provides comprehensive exposure to high-quality, high-dividend-yielding SOEs listed in Hong Kong. Related OTC products include: Hua An Hang Seng Southbound Connect China SOE Dividend ETF Feeder Fund A (020866) / Feeder Fund C (020867).

Product Introduction: Hua An SOE Dividend ETF (561060)

The Hua An SOE Dividend ETF (561060) tracks the CSI SOE Dividend Index. This index selects 100 stocks from state-owned enterprises that exhibit high cash dividend yields, stable dividend payouts, and significant size and liquidity, reflecting the overall performance of representative high-dividend SOEs in the A-share market. Related OTC products include: Hua An CSI State-owned Enterprise Dividend ETF Feeder Fund A (020461) / Feeder Fund C (020462).

Risk Disclosure:

The above is solely an objective introduction of the current constituent stock distribution of the underlying indices and does not constitute any investment advice or a guarantee of investment returns. The index compiler may subsequently adjust the index compilation methodology, and the composition and weight of index constituents may change dynamically. Please be aware of the risks associated with certain index constituents having large weights and high concentration. This fund is an equity fund, belonging to a category with higher risk and higher expected returns. It primarily invests in the constituent stocks and candidate constituent stocks of the underlying index. Its feeder fund primarily tracks the performance of the underlying index by investing in the target ETF. The expected returns and risks of this fund are higher than those of money market funds, bond funds, and hybrid funds, and it has a risk-return profile similar to that of the underlying index. The fund management company does not guarantee a profit or a minimum return from this fund. Past performance does not indicate future results. The performance of other funds managed by the fund manager does not constitute a guarantee of this fund's performance. Investment in fund products involves risks of fluctuating returns. Invest with caution. Please refer to the fund's contract, prospectus, and other legal documents for details.