Quantitative Models and Construction Methods - **Model Name**: Hong Kong Stock CCASS Preferred 20 Portfolio **Model Construction Idea**: The model leverages CCASS data from the Hong Kong Stock Exchange to track and replicate the monthly holdings of individual brokers. It identifies high-performing brokers and constructs a portfolio based on their holdings[36][38] **Model Construction Process**: 1. Use CCASS data to analyze the holdings of brokers in Hong Kong stocks 2. At the end of each month, rank all brokers based on their standardized excess Sharpe ratio and monthly win rate, and calculate a composite score by equally weighting these two metrics 3. Select the top N brokers with the highest composite scores to form a pool of high-performing brokers 4. Allocate funds equally among the N brokers and aggregate their latest holdings 5. Retain the top M stocks by weight and allocate them equally to construct the portfolio Formula: $ \text{Composite Score} = \text{Standardized Excess Sharpe Ratio} + \text{Monthly Win Rate} $ Parameters: - N = 10 (number of brokers) - M = 20 (number of stocks) **Model Evaluation**: The model effectively identifies high-performing brokers and constructs a portfolio with strong historical performance, demonstrating its potential for excess returns[36][37][38] Model Backtesting Results - **Hong Kong Stock CCASS Preferred 20 Portfolio**: - February 2026 performance: - Portfolio return: -3.36% - Benchmark (Hang Seng Index) return: -2.76% - Excess return: -0.60%[38] - Full period performance (2020.1–2026.2): - Annualized excess return: 17.0% - Excess Sharpe ratio: 2.23[38] - Annualized performance by year: - 2020: Annualized excess return 22.6%, Sharpe ratio 2.33, maximum drawdown -4.9%, monthly win rate 66.7% - 2021: Annualized excess return 13.8%, Sharpe ratio 1.72, maximum drawdown -4.1%, monthly win rate 75.0% - 2022: Annualized excess return 11.4%, Sharpe ratio 1.35, maximum drawdown -5.6%, monthly win rate 66.7% - 2023: Annualized excess return 19.6%, Sharpe ratio 2.85, maximum drawdown -3.3%, monthly win rate 75.0% - 2024: Annualized excess return 21.6%, Sharpe ratio 3.04, maximum drawdown -3.8%, monthly win rate 91.7% - 2025: Annualized excess return 18.1%, Sharpe ratio 3.41, maximum drawdown -2.6%, monthly win rate 83.3% - 2026 YTD: Annualized excess return -8.3%, Sharpe ratio -1.64, maximum drawdown -1.8%, monthly win rate 0.0% - Full period: Annualized excess return 17.0%, Sharpe ratio 2.23, maximum drawdown -7.3%, monthly win rate 74.3%[39]

Group 1: Market Overview - The Hong Kong stock market had a strong start in January 2026, with the Hang Seng Index rising by 6.9% and the Hang Seng Tech Index increasing by 4.5%, outperforming many international markets [7][8] - The average daily trading volume in the Hong Kong stock market increased to HKD 210.9 billion in January 2026, a 46% rise compared to December 2025 [7][8] Group 2: Real Estate Industry - Shanghai has initiated a program to purchase second-hand housing for use as affordable rental housing, aiming to address the "old for new" housing exchange and reduce inventory of new homes [18][20] - In January 2026, Shanghai's residential property sales showed signs of recovery, with new home transactions reaching 15,000 units, a year-on-year increase of 35.8%, and second-hand home transactions at 22,800 units, up 24.2% [21][22] Group 3: Company Analysis - Stone Technology - Stone Technology is projected to significantly reduce losses in new business segments, with expectations of net profits for 2025-2027 at CNY 13.4 billion, 24.6 billion, and 32.0 billion respectively, with corresponding EPS of 5.17, 9.49, and 12.36 [4][23] - The company is recognized as the global leader in the robotic vacuum cleaner market, and its brand strategy is expected to drive rapid revenue growth and stabilize profitability [4][24] Group 4: Company Analysis - Leshushit - Leshushit is a leading player in the African hygiene products market, with strong local production capabilities and a well-established distribution network, which is expected to facilitate further expansion into global emerging markets [5][30] - The company is projected to achieve net profits of USD 1.12 million, 1.32 million, and 1.54 million for 2025-2027, with corresponding EPS of 0.18, 0.21, and 0.25 [5][30]

- The "Hong Kong CCASS Preferred 20 Portfolio" model was constructed using a two-step screening method: first selecting brokers and then selecting stocks[35][39] - The model identifies top-performing brokers by standardizing excess Sharpe ratios and monthly win rates, then combines them into a composite score[39] - The portfolio is built by equally distributing funds among the top 10 brokers and selecting the top 20 stocks based on weight, which are then equally weighted[39] - The benchmark index for the portfolio is the Hang Seng Index (HSI.HI)[40] Model Performance - January 2026 portfolio return: 6.32%, Hang Seng Index return: 6.85%, excess return: -0.53%[41] - Full period (2020.1–2026.1) excess annualized return: 19.3%, excess Sharpe ratio: 2.45[41] - Annualized excess returns by year: 2020: 30.9%, 2021: 12.0%, 2022: 11.9%, 2023: 22.5%, 2024: 23.2%, 2025: 18.6%, 2026 YTD: -6.2%[42] - Maximum drawdown during the full period: -7.6%[42] - Monthly win rate during the full period: 75.3%[42]

Quantitative Models and Construction Methods Model Name: Hong Kong Stock Connect CCASS Preferred 20 Portfolio - **Model Construction Idea**: The model uses Hong Kong Stock Exchange CCASS data to track and replicate the monthly holdings of individual brokers, selecting high-performing brokers and their top holdings to construct a portfolio[4][34] - **Model Construction Process**: 1. **Broker Selection**: At the end of each month, all brokers are ranked based on their standardized excess Sharpe ratio and monthly win rate, and the top N brokers are selected to form a pool of high-performing brokers[34] 2. **Stock Selection**: Funds are equally allocated to the N brokers, and their latest holdings are aggregated. The top M stocks by weight are retained and equally weighted to form the portfolio[34] 3. **Parameters**: N = 10 (number of brokers), M = 20 (number of stocks)[34] - **Model Evaluation**: The model has shown strong performance with high excess returns and Sharpe ratios, indicating its effectiveness in selecting high-performing stocks[34][36] Model Backtesting Results Hong Kong Stock Connect CCASS Preferred 20 Portfolio - **December 2025 Performance**: Portfolio return of 0.91%, Hang Seng Index return of -0.88%, excess return of 1.79%[36] - **Annual Performance 2025**: Portfolio return of 49.9%, annualized excess return of 17.8%[36] - **Full Period Performance (2020.1~2025.12)**: Annualized excess return of 20.0%, excess Sharpe ratio of 2.52[36] Quantitative Factors and Construction Methods Factor Name: Excess Sharpe Ratio and Monthly Win Rate - **Factor Construction Idea**: These factors are used to evaluate and rank brokers based on their risk-adjusted returns and consistency in generating positive returns[34] - **Factor Construction Process**: 1. **Excess Sharpe Ratio**: Calculated as the ratio of excess return to excess volatility for each broker[34] 2. **Monthly Win Rate**: The proportion of months in which the broker's portfolio outperforms the benchmark[34] 3. **Standardization**: Both factors are standardized and equally weighted to form a composite score for ranking brokers[34] - **Factor Evaluation**: These factors effectively identify brokers with superior risk-adjusted performance and consistency, contributing to the overall success of the portfolio[34] Factor Backtesting Results Excess Sharpe Ratio and Monthly Win Rate - **Top Brokers Performance**: - **Phillip Securities (Hong Kong)**: Annualized excess return of 10.4%, excess Sharpe ratio of 1.73, monthly win rate of 73.61%[35] - **GF Securities**: Annualized excess return of 12.9%, excess Sharpe ratio of 1.29, monthly win rate of 79.17%[35] - **Grand Partners Securities**: Annualized excess return of 18.1%, excess Sharpe ratio of 1.65, monthly win rate of 73.61%[35] Portfolio Holdings for January 2026 - **Top Holdings**: - **Tencent Holdings (0700.HK)**: PEttm 22.9, ROEttm 4.7%, Market Cap 54630.2 billion HKD[40] - **Xiaomi Corporation (1810.HK)**: PEttm 21.2, ROEttm 5.1%, Market Cap 10236.6 billion HKD[40] - **SMIC (0981.HK)**: PEttm 118.5, ROEttm 0.9%, Market Cap 7006.8 billion HKD[40] - **Hong Kong Exchanges and Clearing (0388.HK)**: PEttm 30.0, ROEttm 7.7%, Market Cap 5167.7 billion HKD[40] - **Ping An Insurance (2318.HK)**: PEttm 7.7, ROEttm 2.9%, Market Cap 12924.9 billion HKD[40]

Group 1: Market Overview - The Hong Kong stock market performed poorly in October 2025, with the Hang Seng Index declining by 3.5% and the Hang Seng Technology Index falling by 8.6% [5] - The average daily trading volume in October was HKD 211.3 billion, a decrease of 16.6% compared to September 2025 [5] - Value sectors outperformed growth sectors, with coal, oil and petrochemicals, electricity, and utilities leading the gains [5] Group 2: Fund Flow Analysis - Southbound capital saw a total net inflow of HKD 925 billion in October 2025, with a cumulative net inflow of HKD 1.26 trillion for the year, marking a 156% increase compared to 2024 [6] - The market value proportions of southbound funds, foreign capital, domestic capital, and Hong Kong capital as of October 28, 2025, were 21.49%, 58.86%, 12.66%, and 6.99% respectively [6] Group 3: Industry Insights Consumer Goods - The oral care market in China reached a retail scale of CNY 30.2 billion in 2023, with a growth rate of 0.2% year-on-year [16] - The sanitary napkin market is projected to grow to CNY 105 billion in 2024, with a year-on-year growth of 2.9% [17] - The global wet wipes market is expected to reach USD 18.4 billion in 2024, growing at 2.7% year-on-year [17] Military Industry - The demand for titanium materials in aerospace and naval applications is expected to reach 49,000 tons by 2027 [22] - The titanium material usage in the shipbuilding sector is projected to grow significantly, driven by national strategies for marine development [24] - Beneficiary stocks in the titanium sector include BaoTi Co., West Superconducting, and West Materials [26] Automotive Industry - SAIC Group reported a revenue of CNY 468.99 billion for the first three quarters of 2025, a year-on-year increase of 9.0% [31] - The company’s Q3 sales volume reached 1.1407 million vehicles, reflecting a 38.7% increase year-on-year [32] - The company is focusing on enhancing decision-making efficiency and optimizing resource allocation through the establishment of a new passenger vehicle division [33] Nonferrous Metals - Yun Aluminum Co. achieved a revenue of CNY 44.072 billion in the first three quarters of 2025, with a year-on-year increase of 12.47% [35] - The company’s net profit for Q3 was CNY 1.63 billion, a year-on-year increase of 25.31% [35] - The company plans to increase its dividend payout ratio, enhancing investor confidence [38] Semiconductor Testing - The company reported a revenue of CNY 737 million for the first three quarters of 2025, a year-on-year increase of 44.01% [40] - The company has successfully developed the first domestic open X-ray source, marking a significant advancement in high-end detection equipment [41] - The acquisition of SSTI is expected to enhance the company's performance in the high-end semiconductor testing equipment sector [42]

- The report introduces the "Hong Kong Multi-Factor Model," which includes four categories of factors: technical, capital, fundamental, and analyst expectations. These factors are applied to Hong Kong Stock Connect constituent stocks and have demonstrated excellent performance in group analysis[36][41] - The "Hong Kong Stock Connect Preferred 20 Portfolio" is constructed monthly by selecting the top 20 stocks with the highest scores based on the multi-factor model. The portfolio is equally weighted, and the benchmark index is the Hong Kong Composite Index (HKD) (930930.CSI)[38] - The construction process of the "Hong Kong Stock Connect Preferred 20 Portfolio" involves evaluating stocks using the multi-factor model, ranking them based on their scores, and selecting the top 20 stocks for equal-weighted allocation[38] - The report evaluates the "Hong Kong Stock Connect Preferred 20 Portfolio" positively, noting its strong historical performance with an annualized excess return of 12.9% and an excess return volatility ratio of 1.0 over the period from January 2015 to October 2025[38][40] - The October 2025 performance of the "Hong Kong Stock Connect Preferred 20 Portfolio" showed a return of -3.8%, compared to the benchmark index return of -3.6%, resulting in an excess return of -0.1%[38] - The historical performance metrics of the "Hong Kong Stock Connect Preferred 20 Portfolio" include an annualized excess return of 12.9%, annualized excess volatility of 13.5%, excess return volatility ratio of 1.0, and maximum drawdown of 18.2% over the period from January 2015 to October 2025[39][40]

- The report introduces a multi-factor model for Hong Kong stocks, which includes four categories of factors: technical, capital, fundamental, and analyst expectations[12][36][37] - The construction of the "Hong Kong Stock Preferred 20 Portfolio" is based on selecting the top 20 stocks with the highest scores from the Hong Kong Stock Connect sample stocks at the end of each month, using an equal-weighted approach. The benchmark index is the Hong Kong Composite Index (930930.CSI)[5][39][40] - The "Hong Kong Stock Preferred 20 Portfolio" demonstrates an annualized excess return of 12.9% over the entire backtesting period (2015.1~2025.9), with an excess return volatility ratio of 1.0[5][40] - In September 2025, the portfolio's return was 0.25%, while the benchmark index return was 7.65%, resulting in an excess return of -7.41%[5][39] - The October 2025 portfolio allocation increased its exposure to the non-ferrous metals sector, reflecting adjustments based on market trends[6][43][44]

- Model Name: Hong Kong Stock Selection 20 Portfolio; Model Construction Idea: The model selects the top 20 stocks with the highest scores at the end of each month and constructs an equally weighted portfolio; Model Construction Process: The model uses four types of factors (technical, capital, fundamental, and analyst expectations) to evaluate Hong Kong Stock Connect constituent stocks. The portfolio is benchmarked against the Hong Kong Composite Index (HKD) (930930.CSI). The formula for the excess annualized return is: $$ \text{Excess Annualized Return} = \frac{\text{Portfolio Return} - \text{Benchmark Return}}{\text{Benchmark Return}} $$ Model Evaluation: The model has shown superior performance in the Hong Kong Stock Connect constituent stocks[4][32][34] - Factor Name: Technical Factor; Factor Construction Idea: The factor is based on technical indicators; Factor Construction Process: The factor is constructed using various technical indicators such as moving averages, relative strength index (RSI), and others. The formula for the technical factor score is: $$ \text{Technical Factor Score} = \sum_{i=1}^{n} w_i \cdot \text{Indicator}_i $$ where \( w_i \) represents the weight of each indicator and \( \text{Indicator}_i \) represents the value of each technical indicator; Factor Evaluation: The technical factor has shown good performance in the Hong Kong Stock Connect constituent stocks[32][33] - Factor Name: Capital Factor; Factor Construction Idea: The factor is based on capital flow data; Factor Construction Process: The factor is constructed using data on capital inflows and outflows. The formula for the capital factor score is: $$ \text{Capital Factor Score} = \frac{\text{Capital Inflow} - \text{Capital Outflow}}{\text{Total Capital}} $$ Factor Evaluation: The capital factor has shown good performance in the Hong Kong Stock Connect constituent stocks[32][33] - Factor Name: Fundamental Factor; Factor Construction Idea: The factor is based on fundamental financial data; Factor Construction Process: The factor is constructed using various financial metrics such as price-to-earnings ratio (P/E), return on equity (ROE), and others. The formula for the fundamental factor score is: $$ \text{Fundamental Factor Score} = \sum_{i=1}^{n} w_i \cdot \text{Metric}_i $$ where \( w_i \) represents the weight of each metric and \( \text{Metric}_i \) represents the value of each financial metric; Factor Evaluation: The fundamental factor has shown good performance in the Hong Kong Stock Connect constituent stocks[32][33] - Factor Name: Analyst Expectations Factor; Factor Construction Idea: The factor is based on analyst ratings and expectations; Factor Construction Process: The factor is constructed using data on analyst ratings, target prices, and earnings forecasts. The formula for the analyst expectations factor score is: $$ \text{Analyst Expectations Factor Score} = \sum_{i=1}^{n} w_i \cdot \text{Analyst Rating}_i $$ where \( w_i \) represents the weight of each analyst rating and \( \text{Analyst Rating}_i \) represents the value of each analyst rating; Factor Evaluation: The analyst expectations factor has shown good performance in the Hong Kong Stock Connect constituent stocks[32][33] Model Backtest Results - Hong Kong Stock Selection 20 Portfolio, Excess Annualized Return: 13.8%, Excess Annualized Volatility: 13.3%, Excess Return Volatility Ratio: 1.0, Maximum Drawdown: 18.2%[35][36][37]

Quantitative Models and Construction Methods Model Name: Hong Kong Stock Selection 20 Portfolio - **Model Construction Idea**: The model aims to track the monthly performance of a long portfolio by selecting the top 20 stocks with the highest scores based on multiple factors. The benchmark is the Hong Kong Composite Index (HKD) (930930.CSI) [40][42] - **Model Construction Process**: - The model uses four types of factors: technical, capital, fundamental, and analyst expectations [40][41] - At the end of each month, the top 20 stocks with the highest scores are selected and equally weighted to construct the Hong Kong Stock Selection 20 Portfolio [42] - **Model Evaluation**: The model has shown excellent performance in the Hong Kong Stock Connect sample stocks [40] Model Backtesting Results - **Hong Kong Stock Selection 20 Portfolio**: - **July 2025**: Portfolio return 11.6%, benchmark index return 4.8%, excess return 6.8% [42] - **Overall Period (2015.1~2025.7)**: Excess annualized return 13.9%, excess return volatility ratio 1.0 [42][44] Quantitative Factors and Construction Methods Factor Name: Technical, Capital, Fundamental, Analyst Expectations - **Factor Construction Idea**: These factors are used to evaluate the performance of Hong Kong Stock Connect sample stocks [40] - **Factor Construction Process**: - **Technical**: Based on stock price movements and technical indicators - **Capital**: Based on capital flow and trading volume - **Fundamental**: Based on financial metrics such as PE ratio, ROE, etc. - **Analyst Expectations**: Based on analyst ratings and forecasts [40][41] - **Factor Evaluation**: These factors have shown excellent performance in the Hong Kong Stock Connect sample stocks [40] Factor Backtesting Results - **Technical, Capital, Fundamental, Analyst Expectations**: - **July 2025**: Excess annualized return 13.9%, excess return volatility ratio 1.0 [42][44]

- Model Name: Hong Kong Stock Selection 20 Portfolio; Model Construction Idea: The model selects the top 20 stocks with the highest scores based on four types of factors (technical, capital, fundamental, and analyst expectations) from the Hong Kong Stock Connect sample stocks and constructs an equal-weighted portfolio at the end of each month; Model Construction Process: The model uses the Hong Kong Composite Index (HKD) (930930.CSI) as the benchmark. The specific construction process involves selecting the top 20 stocks with the highest scores based on the four types of factors and constructing an equal-weighted portfolio at the end of each month[3][37][39]; Model Evaluation: The model has shown excellent performance in the Hong Kong Stock Connect sample stocks[37] - Factor Name: Technical Factors; Factor Construction Idea: Technical factors are constructed based on the price and volume data of stocks; Factor Construction Process: The specific construction process involves calculating various technical indicators such as moving averages, relative strength index (RSI), and moving average convergence divergence (MACD) to evaluate the stock's price trend and momentum[37][38]; Factor Evaluation: Technical factors have shown good performance in the Hong Kong Stock Connect sample stocks[37] - Factor Name: Capital Factors; Factor Construction Idea: Capital factors are constructed based on the capital flow data of stocks; Factor Construction Process: The specific construction process involves calculating the net capital inflow and outflow of stocks to evaluate the stock's capital flow trend[37][38]; Factor Evaluation: Capital factors have shown good performance in the Hong Kong Stock Connect sample stocks[37] - Factor Name: Fundamental Factors; Factor Construction Idea: Fundamental factors are constructed based on the financial data of stocks; Factor Construction Process: The specific construction process involves calculating various financial ratios such as price-to-earnings (P/E) ratio, return on equity (ROE), and total market value to evaluate the stock's financial health and valuation[37][38]; Factor Evaluation: Fundamental factors have shown good performance in the Hong Kong Stock Connect sample stocks[37] - Factor Name: Analyst Expectation Factors; Factor Construction Idea: Analyst expectation factors are constructed based on the analyst ratings and target prices of stocks; Factor Construction Process: The specific construction process involves collecting and analyzing the analyst ratings and target prices of stocks to evaluate the stock's future performance expectations[37][38]; Factor Evaluation: Analyst expectation factors have shown good performance in the Hong Kong Stock Connect sample stocks[37] Model Backtest Results - Hong Kong Stock Selection 20 Portfolio, Annualized Excess Return: 13.3%, Excess Return Volatility Ratio: 1.0[4][40][41] Factor Backtest Results - Southbound Capital, Average Return: 25.7%[32][36] - Foreign Capital, Average Return: 13.5%[32][36] - Domestic Capital, Average Return: 14.0%[32][36] - Hong Kong Capital and Others, Average Return: 10.2%[32][36]