Definition
The Hang Seng Index (HSI) is a market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies in the Hong Kong stock market and as such is the main indicator of the overall market performance in Hong Kong. These 50 constituent companies represent about 58% of the capitalisation of the Hong Kong Stock Exchange.
Key Takeaways
- The Hang Seng Index (HSI) is a market capitalization-weighted index that tracks the performance of the largest and most liquid companies listed on the Hong Kong Stock Exchange.
- It reflects the health of the Hong Kong economy and is used as an indicator of the overall financial market in Hong Kong and Asia.
- The index’s value is calculated in real-time during market hours and it generally includes the 50 largest companies from different industries such as finance, utilities, properties, and commerce & industry.
Importance
The Hang Seng Index (HSI) is crucial in the financial world as it serves as a key barometer of the health and performance of the Hong Kong Stock Exchange and indirectly, the Asian markets as well.
This market-weighted index shows the overall movement of companies listed on the Hong Kong Stock Exchange, with its components accounting for about 67% of its total market capitalization.
Therefore, investors around the globe monitor the HSI to gauge the overall sentiment and outlook of the Asian economy, particularly in Hong Kong, making business and investment decisions based on its movements.
This means changes in the HSI could have significant global economic implications.
Explanation
The Hang Seng Index (HSI) serves as a key barometer for assessing the general health and performance of the Hong Kong Stock Exchange, and by extension, an indicator of the strength and vitality of the Hong Kong economy. Nowadays, with Hong Kong being one of the world’s leading financial hubs, the HSI is often used as a reference point for global investors interested in Asian markets.
It provides a broad view of the stock market’s performance and indicates prevailing market sentiments, enabling traders and analysts to track market movements in a reliable, comprehensive and dialed-down manner. Like other stock indices, the HSI is used by investors, analysts, and the financial media as a benchmark for not just individual portfolio but also mutual fund performance.
For example, fund managers might aim to exceed the HSI’s returns with their own investment portfolios, or investors may purchase index funds designed to replicate the performance of the HSI. Hence, the Hang Seng Index is not just a standing testament to the execution of financial strategies, but it also plays a central role in investment decision-making processes.
Examples of Hang Seng Index
In 2015, the Hang Seng Index experienced one of its largest daily percentage drops, declining by
8%. The drop was attributed to the People’s Bank of China’s decision to devalue the yuan. This event illustrates how international policy decisions can significantly affect the Hang Seng Index, further showing its sensitivity to regional and global economic changes.
Apple Inc. is an American multinational technology company and its performance, along with other tech giants, often impact Hang Seng Index. For example, when Apple released its Q1 earnings report in 2021 and demonstrated better than expected results, markets in Asia, including Hong Kong’s Hang Seng Index, reacted positively. This showcased substantial correlation between major international companies and the Hong Kong stock market.
The outbreak of COVID-19 in 2020 had significant impacts globally, and the Hang Seng Index was no exception. As uncertainties surrounding the global pandemic increased, the Hang Seng Index dropped nearly 10% in March
This example illustrates how unexpected global events can impact the financial index.
Frequently Asked Questions about Hang Seng Index
What is Hang Seng Index?
The Hang Seng Index, locally known as the HSI, is the most widely quoted indicator of the performance of the Hong Kong Stock Market. Hang Seng is a freefloat-adjusted market-weighted stock market index. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and as the main indicator of the overall market performance in Hong Kong.
When was the Hang Seng Index launched?
The Hang Seng Index was first published on 24 November 1969. It was intended to serve as a barometer for the Hong Kong economy and is now one of the earliest stock market indexes in Hong Kong.
How is Hang Seng Index calculated?
The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index. The value of the index is calculated by dividing the total market capitalization of the constituent stocks by the index divisor, which is a factor adjusted to reflect changes in the market capitalization of the index.
What are the trading hours for Hang Seng Index?
The Hang Seng Index trades between 9:30 AM to 12:00 PM and from 1:00 PM to 4:00 PM, Hong Kong time. The lunch break is from 12:00 PM to 1:00 PM.
Who maintains the Hang Seng Index?
The Hang Seng Index is maintained and reviewed by the Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank, which is among the largest banks registered and listed in Hong Kong in terms of market capitalisation.
Related Entrepreneurship Terms
- Stock Market
- Hong Kong Stock Exchange
- Market Capitalization
- Hong Kong Dollar
- Equity Index
