What is the Hang Seng Index and how can it help you?

Hang Seng Index
Hang Seng Index
Hang Seng Index

The Hang Seng Index (stock index) currently represents approximately 50 of the largest businesses on the Hong Kong Stock Exchange. It is considered a key indicator of Asia’s financial market strength.

Hang Seng Indexes Company was founded in 1969 and has a 100-value. The index gives companies a weighting based upon their market capitalisation. This is similar in concept to the UK’s FTSE 100 and the German DAX. However, it differs from the Dow Jones that lists companies based only on their share price. A Hang Seng Index company can only have a 10% weight.

Hang Seng Indexes in March 2021 announced that the index would grow its constituting companies to 80 by mid-2022 and eventually to 100 by that time. The Hang Seng Index must not be confused by the Hang Seng China Enterprises Index which tracks the performance and trading volume of 50 H.-share Chinese mainland securities in Hong Kong.

Hang Seng 50 constituents

The Hang Seng Index’s constituents can be divided into the following categories: finance, property, utilities, commerce and industry. Tencent and Alibaba are the two largest components of the index based on weighting. HSBC, whose roots are in British Hong Kong and the pan-Asian insurer giant AIA Group are among the prominent businesses included in the index.

Each sub-category is further sub-divided into a total 12 sub-categories. Here’s the Hang Seng Index Sector composition as it appeared on July 6, 2021. The percentage points are closest to 0. Notice: As of July 2021, the twelve th categories, Materials, were not represented.

How often does Hang Seng Index companies change their names?

The Hang Seng 50 index undergoes a quarterly review. Companies are admitted or denied after external consultation and analysis. To be considered for selection, companies must meet certain criteria, including market capitalisation, turnover, financial performance, and representativeness. A minimum of three months of listing history should be available on the Hong Kong Stock Exchange.

How is Hang Seng Index calculated

The Hang Seng 50 calculation is made at 2-second intervals during the Hong Kong Stock Exchange trading hours. It is calculated using a freefloat-adjusted equation which takes into consideration current prices, closing prices, and issued shares. It also uses a Freefloat -adjusted Factor and a Capital Factor (CF), each of which is between 0 and 1, and adjusted quarterly.

What does the Hang Seng Index Price mean?

The Hang Seng 50’s price indicates whether shares of companies included in the index are falling or rising. If the Hang Seng 50’s price rises, this means that one company or group of companies is experiencing gains. The overall index’s price will also increase. In contrast, a falling Hang Seng 50 price means that index companies are seeing a decline in their prices.

Hang Seng 50 ranks are based on a weighted calculation focusing on stock capital. This means that companies with a higher weighting will often see share price fluctuations have a greater impact on the larger index.

What determines the Hang Seng Index Price?

As with any stock index price, Hang Seng is affected by a number of basic and technological drivers related to the Hong Kong/Chinese economies as well international influences. But, as the majority of companies included in the index are based in mainland China, news and economic data from China tend to have a greater impact on the index than Hong Kong-based events. The US-China relations, HK$ strength, and economic data can all have a significant impact on the price.

These drivers are expected to move the Index in a particular direction. However, traders must consider how all factors affect each other and not just one. These are just a few key considerations when trading Hang Seng Index.

US/China relationship

The Hang Seng Index may be affected by the US-China relations. A strained US-China sentiment could cause downward pressure on the market. As an example, the Hang Seng Index plunged in 2018 due to concerns about US-China’s slow progress towards a trade deal.

Additionally, Hang Seng telco stocks, such as China Mobile or China Telecom, were temporarily delisted by the NYSE in early 2021. They were believed to have links with the Chinese military. Their price dropped on the Hang Seng Index. Traders should pay attention to such events. They can learn a lot from these news events about how the US-China relationship is developing.

HK dollar strength

It is worth keeping an eye on Hong Kong dollar (HKD), as it could be used to indicate possible Hang Seng Index movements. The HKD can be pegged to USD at a range of 7.75 and 7.85. Hong Kong’s central bank, Hong Kong Monetary Authority (HKMOA), buys and sellers the currency at any limit in order to manage banking liquidity and capital outflow. Hang Seng Index trading closer to 7.85 could cause capital outflow, as shown in Index’s losses from 2018-2019. At 7.75 however, capital inflow might buoy the index.

Social-political events/economic information

Hang Seng Index traders need to be aware of the Chinese GDP figures as well as trade balance statistics, and measures of industrial production like PMIs, when it comes economic data. After data showing an increase in Chinese manufacturing during the preceding month, the Hang Seng Index increased 1.1% to 29,468. This is an indication of why such figures are worthwhile.

Average annual returns for Hang Seng Index

The Hang Seng Index has had an average annual return in excess of 2.8% over the past ten year. The average returns for the Hang Seng Index are roughly what managed funds earn in profit over the course of one year. Below you can see the yearly returns between 2011 and 2020. You should remember that past performance is not a guarantee of future results. (Source: Macrotrends)

Hang Seng Index market hours

The Hang Seng 50 will be open Monday through Friday from 9:30 AM to 4 PM, with a lunch break of one hour at 12PM.

How to trade Hang Seng Index

There are many ways to trade the Hang Seng Index. The most popular are derivatives like CFDs, futures, options, and ETFs. These instruments allow you to be exposed to all 50 companies in one position.

Hang Seng Index CFs

Contracts for difference (CFDs), are derivatives that derive their price from an underlying market. This is the Hang Seng Index. Since you will never own an asset, you can speculate as to whether it will rise or decrease in value.

Hang Seng Index futures

Futures contracts are agreements to trade an asset at a specified price with a fixed expiry date. Hang Seng futures contracts do not have an underlying physical asset. An index, which is simply a number representing a set of stocks, is what makes them different.

Hang Seng Index options

Hang Seng options allow you to purchase or sell an index at a specified price and date. CFDs are the best way to trade the Hang Seng Index when it is not available via options.

Hang Seng Index stocks & ETFs

ETFs are investment instruments that hold several stocks. You can trade the Hang Seng Index when available. You can also trade individual stocks on the Hang Seng Index, which allows you to focus on certain sectors.

How to Shorten the Hang Seng Index

You can shorten the Hang Seng Index by buying short a contract or taking a position that it will fall. This can be achieved by selling short Hang Seng contracts or shorting constituent stock. A Hang Seng ETF may also be available for traders to short. You have two options: you can either buy put options on Hang Seng stocks, if they are too expensive, or you can purchase a Put option for a Hang Seng-related ETF.

Can you buy the Hang Seng Index in Britain?

In the UK, you can invest in Hang Seng Index, but indirectly, using a combination ETFs, mutual funds or index fund. You can also trade the security via derivatives, as described above.

Leave a Reply