More than $1 billion is set to enter the struggling Hang Seng Tech Index with the anticipated addition of two Chinese artificial intelligence companies, according to Morgan Stanley. The index has experienced a decline of over 11% in 2023, despite a growing interest in Chinese AI technologies. Only seven companies within the index have seen stock price increases this year, led by Hua Hong Semiconductor, Lenovo, JD, Midea, and several electric vehicle manufacturers.
The two AI firms, Knowledge Atlas Technology and MiniMax, which both debuted on the Hong Kong exchange in January, are expected to enjoin the Hang Seng Tech Index on June 8. This inclusion is projected to result in passive inflows ranging from $1.25 billion to $1.75 billion. Following the announcement, Morgan Stanley analysts adjusted their price targets for Knowledge Atlas and MiniMax, raising them to 990 Hong Kong dollars ($126.37) and 1,100 HKD, respectively.
Both companies have distinguished themselves in the AI sector, with Knowledge Atlas focusing on coding capabilities and MiniMax offering a broad range of functionalities, including text and audio generation. They have become increasingly popular due to lower usage costs compared to U.S. counterparts, although costs for accessing Chinese AI models have recently risen sharply.
Morgan Stanley analysts predict that each of these AI firms could each generate at least $1 billion in revenue this year, with potential for growth to double that in 2024. The analysts emphasized that AI and large language model entities are likely to play a significant role in shaping the future of Hong Kong’s equity markets, supported by strong regulatory backing and a notable presence in the IPO fundraising landscape.
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