Morgan Stanley predicts $1.75bn AI boost for Hong Kong tech stocks

Morgan Stanley is predicting a significant capital event for Hong Kong's equity markets this summer, driven not by macroeconomic tailwinds but by a scheduled index change. The bank forecasts that the inclusion of two Chinese generative AI companies, Knowledge Atlas Technology, the holding entity for Zhipu AI, and MiniMax, into the Hang Seng Tech Index on June 8, 2026, will trigger between $1.25 billion and $1.75 billion in passive investment inflows.

Passive funds tracking the Hang Seng Tech Index are required to hold stocks in proportion to their index weight. When new names are added, those funds must buy in regardless of valuation sentiment.

With two high-profile AI firms entering simultaneously, Morgan Stanley analysts expect the resulting mechanical buying to be substantial. The bank has responded by raising its price target for MiniMax to 1,100 HKD from 990 HKD and for Knowledge Atlas Technology to 990 HKD from 560 HKD, a 77% upward revision for the latter.

Moving past the technicalities of the index, Morgan Stanley bases its optimism on revenues generated by China's top frontier AI models, predicting revenues of at least one billion dollars by 2026 and even higher at over two billion in 2027.

China's AI offerings today cost end-users about 17% of similar American models' rates, compared to 5% last year, indicating that the pricing differential between China and the US in the AI space is rapidly narrowing.

A key player included in the bank's recommendation list is Alibaba, named a global AI leader, thanks to its verticalisation efforts through in-house chip development (T-Head), cloud computing solutions (AliCloud), and large language models (Qwen).