Morgan Stanley: Two Chinese AI Companies' Inclusion in Hang Seng Tech Index to Attract Over $1 Billion in Passive Funds
Alina Collins
Morgan Stanley expects Zhipu AI parent Knowledge Atlas Technology and MiniMax to join the Hang Seng Tech Index on June 8, triggering $1.25–1.75 billion in passive inflows — the largest incremental injection this year into an index down more than 11%.
How large is this passive-flow wave?
Morgan Stanley's April 27 report forecasts the two additions will trigger $1.25–1.75 billion in passive buying.
This means → ETFs and funds tracking the Hang Seng Tech Index must buy both stocks at their new index weight. The inflow is mechanical, not sentiment-driven.
The index has fallen over 11% year-to-date. This rebalancing ranks among the largest single injections of fresh capital it has received in 2025.
Why were these two companies selected?
Knowledge Atlas Technology operates Zhipu AI, known for code-generation strength. MiniMax differentiates with text-to-audio multimodal capabilities.
Both listed in Hong Kong in January and rallied sharply afterward. Morgan Stanley raised its targets: Knowledge Atlas from HK$560 to HK$990, MiniMax from HK$990 to HK$1,100.
In plain terms = they are the first major Chinese AI-model companies to list in Hong Kong. Rivals Moonshot AI and StepFun remain private.
Are Chinese AI models actually making money?
Morgan Stanley projects each frontier Chinese AI-model company can generate at least $1 billion in revenue this year, with the potential to more than double next year.
Costs are rising, though: in Q1, Chinese AI model API pricing reached at least 17% of comparable U.S. models — up from just 5% a year ago.
This means → the "low-cost edge" of Chinese AI models is narrowing. Whether revenue growth can outrun rising costs is the key test for current valuations.
How will the Hang Seng Tech Index change structurally?
Morgan Stanley wrote: "We believe AI and LLM-related names will become a more important driver for the Hong Kong market, reshaping index composition, market performance, liquidity, and fund flows."
The index's two largest weights — Tencent and Alibaba — have both posted double-digit declines this year. Morgan Stanley names Alibaba its top China internet pick, citing its full-stack positioning from cloud to AI models.
This reflects a broader shift in Hong Kong's tech sector from legacy internet heavyweights toward AI-model newcomers — tech already accounts for 40% of Hong Kong IPO proceeds this year and 43% of the filing pipeline.
Content is for reference only, not financial advice.