Hang Seng Index (HSI)

Definition

The Hang Seng Index (HSI) is a market capitalization-weighted stock market index in Hong Kong, tracking the performance of the 50 largest and most liquid companies listed on the Hong Kong Stock Exchange. Launched in 1969, the HSI serves as a benchmark for the Hong Kong stock market and reflects the overall health of the region’s economy. It aims to provide a representative proxy of the Hong Kong market’s performance with significant economic sectors’ exposure.

Phonetic

Hang Seng Index (HSI) in phonetics would be: /hæŋ sɛŋ ˈɪndɛks/ (H-S-I: /eɪtʃ ɛs aɪ/)

Key Takeaways

1. The Hang Seng Index (HSI) is a market-capitalization-weighted stock market index which tracks the performance of the largest and most liquid companies listed on the Hong Kong Stock Exchange (HKEX).
2. Established in 1969, the HSI is used as a benchmark for the overall performance of the Hong Kong stock market, and its movements are often considered a reflection of investor sentiment towards the Hong Kong and broader Asian economies.
3. The HSI is made up of 50 constituent stocks, representing various sectors and industries within the Hong Kong market. It is calculated and maintained by Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank.

Importance

The Hang Seng Index (HSI) is an essential market indicator in the world of business and finance, particularly for investors focused on Asian markets. As an index that gauges the performance of the largest companies in the Hong Kong stock market, the HSI serves as a reliable benchmark reflecting the health of Hong Kong’s economy and the broader Chinese market. The fluctuation of the HSI can influence investor sentiment, market trends, and investment decisions globally. Tracking the HSI enables investors, market analysts, and financial entities to assess market risk, evaluate investment opportunities, and develop market strategies. Thus, the Hang Seng Index holds critical importance for financial professionals and the global economy.

Explanation

The Hang Seng Index (HSI) is a market capitalization-weighted stock market index in Hong Kong, serving as a key indicator of the performance of the Hong Kong stock market. As one of the most widely-quoted benchmarks for measuring the economic health of Hong Kong’s market, the HSI essentially reflects the value and fluctuations of the largest and most liquid companies listed on the Hong Kong Stock Exchange (HKEX). Investors, financial analysts, and market participants use the HSI as a tool to understand and evaluate the general trends and overall performance of the Hong Kong market. All this information plays a crucial role in guiding both domestic and international investment decisions, as well as informing market commentary and analysis. The HSI was first introduced in 1969 and today is owned and maintained by Hang Seng Indexes Company Limited, a subsidiary of Hang Seng Bank. The index is calculated and disseminated on a real-time basis during trading hours, providing valuable real-time insight into market fluctuations. In order to maintain an accurate representation of the market and accommodate for changes in the Hong Kong economy, the index composition is reviewed quarterly. Companies that make up the HSI are divided into four main industry sectors: finance, utilities, properties, and commerce and industry, offering a diverse and balanced view of the market’s performance. Additionally, financial products like exchange-traded funds (ETFs) and derivatives are linked to the HSI, facilitating investment and risk management strategies for investors. In summary, the HSI holds great significance for investors and market participants as it provides crucial insights into the overall financial landscape of Hong Kong, allowing them to make more informed investment decisions.

Examples

1. Real Estate Industry: In January 2021, the Hang Seng Index experienced a strong surge, driven partly by the performance of property stocks such as Sun Hung Kai Properties and CK Asset Holdings. These companies’ shares rose significantly due to positive developments in Hong Kong’s real estate market, and their impact on the HSI demonstrated the index’s sensitivity to property market performance in both Hong Kong and mainland China. 2. Banking and Financial Sector: In March 2020, as the coronavirus pandemic led to a global economic downturn, banking and financial institutions within the HSI, including HSBC Holdings and BOC Hong Kong, experienced substantial declines in their share prices. As a result, the HSI itself tumbled, reflecting the struggles and uncertainties within the banking and financial sector during the initial stages of the pandemic. 3. US-China Trade Tensions: In May 2019, trade tensions between the US and China escalated, with both countries imposing tariffs on each other’s goods. This directly impacted Hong Kong’s financial markets and led to a decline in the Hang Seng Index. As a major trading and financial hub, Hong Kong is sensitive to global trade developments, and the HSI’s performance that month reflected investor concerns over the long-term implications of the ongoing trade dispute.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Hong Kong Stock Exchange (HKEX)
• Market Capitalization-weighted Index
• HSI Constituent Stocks
• Index Futures and Options
• Tracking Error

Sources for More Information

• Hang Seng Indexes Company Limited
• Bloomberg – HSI:IND
• CNBC – Hang Seng Index
• Reuters – Hang Seng Index