CMS·2025-06-17 05:53Quantitative Models and Construction Methods - Model Name: Hang Seng Stock Connect Non-Bank Financial Index (931024.CSI) Model Construction Idea: The index aims to reflect the overall performance of non-bank financial companies listed in Hong Kong that are part of the Stock Connect program[31][32]. Model Construction Process: 1. Calculate the median daily turnover rate for each Stock Connect security over the past month as the monthly turnover rate. Exclude securities with an average monthly turnover rate below 0.1% over the past 12 months or 3 months, unless their average daily trading volume exceeds HKD 50 million[32]. 2. Select securities from industries such as insurance, capital markets, mortgage credit institutions, other comprehensive financial services, special financial services, and consumer credit as candidate samples[32]. 3. Rank the candidate samples by average daily market capitalization over the past year and select the top 50 securities. If fewer than 50 securities meet the criteria, include all eligible securities[32]. 4. Apply weighting factors between 0 and 1 to ensure no single stock exceeds 15% weight and the top five stocks collectively do not exceed 60% weight[33]. Model Evaluation: The index demonstrates strong representation of large-cap financial stocks, particularly in the insurance sector, and provides a focused investment tool for non-bank financial themes in Hong Kong[34][35][36]. Model Backtesting Results - Hang Seng Stock Connect Non-Bank Financial Index: - Total Return: 53.30%[48] - Annualized Volatility: 33.26%[48] - Maximum Drawdown: 20.29%[48] - Sharpe Ratio: 1.56[48] Quantitative Factors and Construction Methods - Factor Name: Market Capitalization Weighting Factor Construction Idea: Emphasize large-cap stocks to ensure stability and representativeness of the index[36]. Factor Construction Process: 1. Divide constituent stocks into market capitalization tiers: above HKD 500 billion, between HKD 200 billion and HKD 500 billion, and below HKD 500 billion[36]. 2. Assign weights based on market capitalization, with stocks above HKD 500 billion collectively accounting for 46.63% of the index weight, stocks between HKD 200 billion and HKD 500 billion accounting for 28.49%, and stocks below HKD 500 billion accounting for 8.31%[36]. Factor Evaluation: The factor ensures the index is dominated by stable, large-cap stocks, reducing volatility and enhancing reliability[36][40]. - Factor Name: Sector Allocation Factor Construction Idea: Focus on insurance and capital market sectors to capture the core of non-bank financial themes[34][35]. Factor Construction Process: 1. Allocate weights to sectors based on their representation in the index: insurance accounts for 65.11%, securities companies for 11.08%, and other capital market entities for 20.95%[35]. Factor Evaluation: The factor provides a balanced yet focused exposure to key non-bank financial sectors, aligning with the index's thematic goals[34][35]. Factor Backtesting Results - Market Capitalization Weighting Factor: - Weight Distribution: - Above HKD 500 billion: 46.63%[36] - HKD 200 billion–500 billion: 28.49%[36] - Below HKD 500 billion: 8.31%[36] - Sector Allocation Factor: - Weight Distribution: - Insurance: 65.11%[35] - Securities Companies: 11.08%[35] - Other Capital Market Entities: 20.95%[35] Additional Observations - Index Fundamental Characteristics: - ROE (2024): 11.69%[43] - ROE (2025 Q1): 2.94%[43] - Dividend Yield (Last 12 Months): 4.01%[43] - Valuation Metrics: - PE_TTM: 8.52 (22.76% below historical average)[44] - Index Concentration: - Top 10 Constituents Weight: 82.79%[41] - Largest Constituent (Hong Kong Exchange): 17.69% weight[41]