Quantitative Models and Construction Methods 1. Model Name: Hong Kong Stock Selection Portfolio - **Model Construction Idea**: The model aims to select stocks with both fundamental support and technical resonance from an analyst-recommended stock pool[14][15] - **Model Construction Process**: - **Step 1**: Construct an analyst-recommended stock pool based on three types of analyst recommendation events: upward earnings forecast revisions, initial analyst coverage, and analyst report titles exceeding expectations[15] - **Step 2**: Perform dual-layer selection on the analyst-recommended stock pool using fundamental and technical dimensions to select stocks with both fundamental support and technical resonance[15] - **Step 3**: The backtest period for the Hong Kong Stock Selection Portfolio is from January 1, 2010, to December 31, 2025. Considering transaction costs in a fully invested state, the portfolio's annualized return is 19.08%, with an excess return of 18.06% relative to the Hang Seng Index[15] - **Model Evaluation**: The model demonstrates a strong performance with significant excess returns over the Hang Seng Index, indicating its effectiveness in stock selection[15] Model Backtest Results - **Hong Kong Stock Selection Portfolio**: - **Annualized Return**: 19.08%[15] - **Excess Return**: 18.06% relative to the Hang Seng Index[15] - **Information Ratio (IR)**: 1.19[20] - **Tracking Error**: 14.60%[20] - **Maximum Drawdown**: 23.73%[20] - **Return-to-Drawdown Ratio**: 0.76[20] Quantitative Factors and Construction Methods 1. Factor Name: Stable New High Stocks - **Factor Construction Idea**: The factor aims to identify stocks that have recently reached new highs and exhibit stable price paths, leveraging the momentum and trend-following strategies that are particularly effective in the Hong Kong market[21] - **Factor Construction Process**: - **Step 1**: Calculate the 250-day new high distance using the formula: $$ 250 \text{ day new high distance} = 1 - \frac{Close_t}{\text{ts\_max(Close, 250)}} $$ where $Close_t$ is the latest closing price, and $\text{ts\_max(Close, 250)}$ is the maximum closing price over the past 250 trading days[23] - **Step 2**: Screen stocks that have reached a 250-day new high in the past 20 trading days based on analyst attention, relative stock strength, price path stability, and new high continuity[23] - **Step 3**: Select stocks with the following criteria: - Analyst attention: At least 5 buy or hold ratings in the past 6 months - Relative stock strength: Top 20% in terms of price change over the past 250 days - Price path stability: Top 50% based on price displacement ratio and 250-day new high distance over the past 120 days - Trend continuity: Top 50 stocks based on the 250-day new high distance over the past 5 days[24] - **Factor Evaluation**: The factor effectively captures stocks with strong momentum and stable price paths, which are likely to continue their upward trends[21][23] Factor Backtest Results - **Stable New High Stocks**: - **Example Stocks**: J&T Express-W, China Eastern Airlines, Youran Dairy, Hansoh Pharmaceutical, China XLX Fertilizer, etc.[23][29] - **Sector Distribution**: Most new high stocks are in the cyclical sector, followed by finance, technology, consumer, manufacturing, and healthcare sectors[23][29]

Core Viewpoint - The A-share market is experiencing significant gains, while the Hong Kong stock market is facing downward pressure due to capital inflow to A-shares and recent adjustments in the US stock market [1][3]. Group 1: Market Performance - A-shares reached a 10-year high with a trading volume of 2.8 trillion yuan, marking the third-highest in history, and the total market capitalization has reached 107 trillion yuan [8]. - The Hang Seng Index's earnings have been continuously revised downwards, with a projected growth rate of -1.2% for 2025, contrasting with the upward revisions in the US stock market [7]. Group 2: Investor Sentiment - There is a growing bullish sentiment among investors regarding A-shares, with predictions of breaking the 4000-point mark before the National Day holiday [7][11]. - Notable economists express differing views on asset valuations, indicating that while some sectors have room for growth, others may be nearing their peak [11]. Group 3: Liquidity and Market Dynamics - The tightening of Hong Kong dollar liquidity has led to a sharp rise in overnight Hibor rates, which may impact local real estate markets [5]. - The low AH premium at 125% is seen as an "invisible bottom," suggesting that below this level, dividend attractiveness diminishes [5].

Quantitative Models and Construction Methods - **Model Name**: Hong Kong Stock Selection Portfolio **Model Construction Idea**: This model is based on a dual-layer selection process that integrates fundamental and technical analysis. It aims to identify stocks with both fundamental support and technical resonance from an analyst-recommended stock pool[13][14]. **Model Construction Process**: 1. **Analyst Recommendation Pool**: Constructed using three types of analyst recommendation events: upward earnings revisions, initial analyst coverage, and positive surprises in research report titles. 2. **Dual-Layer Screening**: - **Fundamental Screening**: Select stocks with strong fundamental support. - **Technical Screening**: Identify stocks with technical resonance. 3. **Portfolio Backtesting**: The backtesting period spans from January 1, 2010, to June 30, 2025. The portfolio assumes a fully invested position and accounts for transaction costs. **Model Evaluation**: The model demonstrates strong performance, with an annualized return of 19.11% and an excess return of 18.48% relative to the Hang Seng Index over the backtesting period[14]. - **Model Name**: Stable New High Stock Screening **Model Construction Idea**: This model leverages momentum and trend-following strategies, focusing on stocks that have recently reached a 250-day high. The approach emphasizes the effectiveness of momentum effects in the Hong Kong market[19]. **Model Construction Process**: 1. **250-Day High Distance Calculation**: $ 250\text{-Day High Distance} = 1 - \frac{\text{Close}_{\text{latest}}}{\text{ts\_max}(\text{Close}, 250)} $ - $\text{Close}_{\text{latest}}$: Latest closing price - $\text{ts\_max}(\text{Close}, 250)$: Maximum closing price over the past 250 trading days - A value of 0 indicates a new high, while positive values represent the percentage drop from the high[21]. 2. **Screening Criteria**: - **Analyst Attention**: At least five "Buy" or "Overweight" ratings in the past six months. - **Relative Strength**: Top 20% in 250-day price change within the stock universe. - **Price Stability**: Stocks are ranked based on price path smoothness and new high persistence over the past 120 days. The top 50% (minimum 50 stocks) are selected. - **Trend Continuation**: Stocks are ranked based on the average 250-day high distance over the past five days, with the top 50 selected[22]. **Model Evaluation**: The model effectively identifies stocks with stable upward trends, making it a useful tool for momentum-based strategies[19][22]. Model Backtesting Results - **Hong Kong Stock Selection Portfolio**: - **Annualized Return**: 19.11% - **Excess Return (vs. Hang Seng Index)**: 18.48% - **Information Ratio (IR)**: 1.22 - **Tracking Error**: 14.55% - **Maximum Drawdown**: 23.73%[18] Quantitative Factors and Construction Methods - **Factor Name**: 250-Day High Distance **Factor Construction Idea**: This factor measures the proximity of a stock's latest closing price to its 250-day high, capturing momentum and trend-following characteristics[21]. **Factor Construction Process**: - Formula: $ 250\text{-Day High Distance} = 1 - \frac{\text{Close}_{\text{latest}}}{\text{ts\_max}(\text{Close}, 250)} $ - $\text{Close}_{\text{latest}}$: Latest closing price - $\text{ts\_max}(\text{Close}, 250)$: Maximum closing price over the past 250 trading days - Interpretation: A value of 0 indicates a new high, while positive values represent the percentage drop from the high[21]. **Factor Evaluation**: This factor is effective in identifying stocks with strong momentum, particularly in the Hong Kong market[19][21]. Factor Backtesting Results - **250-Day High Distance Factor**: - **Top Performing Sector**: Healthcare (16 stocks identified) - **Other Sectors**: Financials (11 stocks), Consumer (9 stocks), Technology (9 stocks), Cyclical (4 stocks)[22][27]