An Analysis of the Scientific Compilation Logic of the APAC Select High Dividend Index ETF — Strategic Support Behind the Returns

In recent years, some high-dividend strategies have faced challenges due to fluctuations in the fundamentals of constituent stocks. For example, in 2022, the Hang Seng High Dividend Index experienced a significant drawdown due to the drag from the real estate sector. Against this backdrop, the MSCI Asia Pacific Select High Dividend ETF ( $E FUND (HK) MSCI Asia Pacific Select High Dividend Index ETF (03483.HK)$ ), launched by E Fund (Hong Kong), enhances strategy robustness througha systematic compilation methodology,offering investors a new option.

The ETF tracks the MSCI Asia Pacific Select High Dividend Index, which enhances strategy robustness througha systematic compilation methodology,offering investors a new option. Its core logic is reflected in the following three aspects:

1. Covering premium markets to lay a solid foundation

The index focuses on three high-dividend mature markets in the Asia-Pacific region—Hong Kong, Japan, and Australia, selecting constituent stocks from companies listed in Hong Kong that meet the Stock Connect criteria, as well as from the Japanese and Australian markets. The latest iteration includes 47 Hong Kong stocks, 42 Japanese stocks, and 11 Australian stocks, covering 100 securities and forming a cross-regional allocation.[1]

2. Multi-factor screening to avoid value traps

The index methodology incorporates two critical filtering mechanisms: 1) Momentum-based negative screening: By excluding stocks with weak recent price performance, it avoids 'high-dividend traps' caused by deteriorating fundamentals; 2) Market capitalization and dividend-tilted weighting: This weighting approach increases the proportion of large-cap companies, enhancing the overall stability of the portfolio.

3. Regional diversification effect to smooth volatility risk

The index leverages the low correlation (historical rolling correlation of approximately 0.5)[2]) characteristic among the three markets to achieve risk diversification. When one market (e.g., Hong Kong stocks) experiences volatility, the performance of other markets can offset it, improving the investment experience. For example, during years when Hong Kong's high-dividend stocks declined, such as in 2016 and 2020, positive returns from the Japanese and Australian markets effectively cushioned portfolio fluctuations.

4. Historical performance validates strategy effectiveness

Based on historical data, the index has achieved a cumulative return of 130% since its base date, with an annualized return of 9.8% and a Sharpe ratio of 0.64.[3], demonstrating the characteristics of 'high long-term returns and low volatility.' The index's construction logic does not pursue short-term high dividends but instead builds a portfolio with sustained dividend-paying ability and risk resistance through regional diversification, multi-factor screening, and market capitalization weighting. For investors seeking long-term stable returns, this strategy offers a more systematic and sustainable high-dividend investment approach.

[1] Data source: Wind, as of June 24, 2025.

[2] Data source: Bloomberg, Wind, as of July 31, 2025.

[3] Data source: Bloomberg, MSCI, as of July 31, 2025. All data are based on net total return indices, denominated in USD, with the index base date set at August 31, 2016.

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