Last week, the Hong Kong stock market displayed a pattern of consolidation with pronounced structural divergence, as value sectors like financials advanced against the trend while select growth and cyclical areas experienced pullbacks.

According to HuaAn Fund, the interim results and dividend payouts of major state-owned banks are supporting a valuation recovery for mainland bank stocks. Combined with their high dividend yields, low valuations, and the operational stability of central state-owned enterprises, the dividend assets of central SOEs accessible via Stock Connect once again demonstrated their "ballast" value in a volatile market environment.

Looking ahead, the low-interest-rate environment stemming from the domestic rate-cutting cycle and the backdrop of a tepid economic recovery both appear favorable for dividend strategies. Under the market capitalization management directive, central and state-owned enterprises have shown a strong willingness and capacity to distribute dividends. Consequently, HS Connect Central SOE Dividend ETF HuaAn (513920) and SOE Dividend ETF HuaAn (561060) hold significant allocation value.


HK Stocks Waver Amidst Sector Divergence; Financials Outperform

Throughout last week, the Hong Kong market maintained a fluctuating trajectory, with major broad-based indices posting limited changes. However, significant internal structural divergence was apparent. As of September 4, 2026, the Hang Seng Stock Connect China Central SOE Dividend Index rose by 1.64%, while the Hang Seng Index edged up 0.47% and the Hang Seng Tech Index fell 0.73%. In the A-share market, the CSI SOE Dividend Index inched up 0.01%, whereas the CSI 300 Index declined by 1.31%.

At the sector level, value-oriented segments such as financials performed relatively better, while certain growth and cyclical industries corrected. HuaAn Fund pointed out that the Stock Connect Central SOE Dividend Index showcased relative resilience, benefiting from its substantial financial sector weighting and characteristics of high dividend yields and low valuations, once again underscoring the allocative role of dividend assets during market turbulence.


Mainland Bank Valuation Recovery Broadens Dividend Returns Beyond Defensiveness

From an industry structure perspective, the recent relative advantage of dividend assets was primarily driven by the financial sector, particularly the valuation recovery seen in mainland bank stocks. Interim results and dividend declarations from the large state-owned banks bolstered market expectations, leading to strong performances from major lenders such as Bank of China, China Construction Bank, and ICBC.

HuaAn Fund noted that the Stock Connect Central SOE Dividend Index holds significant allocations in banking, transportation, utilities, and telecommunications. The upward movement in banking contributed directly to returns and also reflected the market's renewed focus on assets characterized by stable earnings, ample cash flow, and high payout certainty amid external interest rate volatility and fluctuating risk appetite.

In contrast, materials, industrials, and certain growth sectors experienced more substantial corrections, further highlighting the low-volatility attributes of the Central SOE Dividend Index. Synthesizing recent market activity, HuaAn Fund believes the return drivers for Stock Connect Central SOE dividends are broadening from a purely defensive nature to incorporate bank valuation recoveries and earnings support from select cyclical value sectors.

Hong Kong stocks first declined then rebounded last week, as external rate changes and shifting risk sentiment continued to amplify volatility in growth sectors. High-dividend assets, supported by relatively steady earnings and dividends, provided a foundational buffer. Concurrently, the robust earnings and dividend performance of mainland banks offered additional capital support to Hong Kong's value segments.

Prospectively, the high dividend yields, low valuations, and operational stability of central SOEs underlying the Stock Connect Central SOE Dividend strategy should continue to enhance portfolio resilience against volatility, while retaining flexibility through key weights in financials, energy, and transportation.


HuaAn's Dividend Product Suite as an Allocation Tool

For investors seeking access to dividend strategies via public funds, HuaAn Fund offers a comprehensive product suite covering both Hong Kong and A-share markets:

HS Connect Central SOE Dividend ETF HuaAn (513920): As the first ETF in the market to combine Hong Kong listing, central SOE status, and dividend attributes, it is also the largest ETF tracking the Hang Seng Stock Connect China Central SOE Dividend Index (HSSCSOY), encapsulating high-quality, high-yield central SOEs in Hong Kong within a single index. The off-exchange feeder funds are HuaAn Hang Seng Stock Connect China Central SOE Dividend Feeder A (020866) and Feeder C (020867).

SOE Dividend ETF HuaAn (561060): Tracking the CSI SOE Dividend Index, this index selects 100 state-owned enterprises with high cash dividend yields, stable payout histories, and adequate scale and liquidity, reflecting the overall performance of representative high-dividend SOEs in the A-share market. The corresponding off-exchange feeder funds are HuaAn CSI SOE Dividend ETF Feeder A (020461) and Feeder C (020462).

Fee Structure Disclosure:

For HuaAn Hang Seng Stock Connect China Central SOE Dividend Feeder A (020866): Subscription rates are 0.60% for amounts under 500,000 RMB; 0.30% for amounts between 500,000 and 1,000,000 RMB; and a flat 1,000 RMB fee for amounts of 1,000,000 RMB or more. Redemption fees are 1.50% for holding periods under 7 days and 0.00% for periods of 7 days or longer. The management fee is 0.50% and the custody fee is 0.10%.

For HuaAn Hang Seng Stock Connect China Central SOE Dividend Feeder C (020867): The subscription rate is 0.00%. Redemption fees are 1.50% for holding periods under 7 days and 0.00% for periods of 7 days or longer. The management fee is 0.50%, the custody fee is 0.10%, and the sales service fee is 0.25%.

For HuaAn CSI SOE Dividend ETF Feeder A (020461): Subscription rates are 0.60% for amounts under 1,000,000 RMB; 0.30% for amounts between 1,000,000 and 5,000,000 RMB; and a flat 1,000 RMB fee for amounts of 5,000,000 RMB or more. Redemption fees are 1.50% for holding periods under 7 days and 0.00% for periods of 7 days or longer. The management fee is 0.50% and the custody fee is 0.10%.

For HuaAn CSI SOE Dividend ETF Feeder C (020462): The subscription rate is 0.00%. Redemption fees are 1.50% for holding periods under 7 days and 0.00% for periods of 7 days or longer. The management fee is 0.50%, the custody fee is 0.10%, and the sales service fee is 0.25%.

Regarding ETF subscription/redemption fees, sales institutions may charge a fee or commission of no more than 0.5% for cash subscription or redemption transactions, which includes costs incurred by exchanges and clearing institutions.


Risk Disclosure

The above content is solely an objective introduction to the current constituent stocks of the underlying indices and does not constitute any investment advice or a guarantee of investment returns. The index provider may subsequently adjust the index methodology, and the composition and weights of index constituents may change dynamically. Investors should be mindful of risks associated with constituents that hold large weights or exhibit high concentration.

This fund is an equity fund with relatively high risk and expected returns, primarily investing in the constituent stocks of the underlying index and backup constituents. The feeder funds primarily achieve tight tracking 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 possesses risk-return characteristics similar to the underlying index.

The fund management company does not guarantee profitability or a minimum return. Past performance of the fund does not indicate future results, and the performance of other funds managed by the fund manager does not constitute a guarantee of this fund's performance. Fund product returns are subject to volatility risk. Investment requires caution; please carefully read the fund contract, prospectus, and other legal documents before investing.