The Hang Seng Index (HSI) is a free-float market capitalization-weighted index of the largest companies that trade on the Hong Kong Exchange (HKEx). It serves as a key barometer for both Hong Kong and broader Asian markets.
Key Highlights
- The Hang Seng Index is the go-to benchmark for blue-chip stocks on the Hong Kong Stock Exchange.
- Comprising 82 stocks as of December 2023, it offers a diversified portfolio of financial, utility, property, and industrial giants.
- The index uses a free-float capitalization-weighted scheme with an 8% cap on individual component weighting.
Understanding the Hang Seng Index
The HSI is the most widely cited indicator for the Hong Kong economy and is often referenced by investors as a key market benchmark. Launched in 1969, its base period was July 31, 1964, when it was valued at 100. Today, HSI covers approximately 65% of the total market capitalization of the Hong Kong Exchange.
Given Hong Kong’s unique status as a special administrative region of China, many Chinese companies are also listed on the Hong Kong Exchange. This relationship tightens the economic linkage between China and Hong Kong, making HSI essential for understanding both markets.
HSI is managed by Hang Seng Indexes Company Limited, a subsidiary of Hang Seng Bank. As of December 2023, the five largest constituents in the index are HSBC Holdings, Alibaba, Tencent, AIA Group, and China Construction Bank.
The Structure of the Hang Seng Index
The HSI is a free-float-adjusted market capitalization-weighted index. Its value is calculated and updated in real time at two-second intervals during the trading hours of HKEx. The HSI is a price index, not adjusted for cash dividends or warrant bonuses.
Targeting the largest and most liquid stocks on HKEx, the number of constituents in the index can fluctuate. As of December 2023, the index included 82 companies.
These companies fall under four sub-sectors:
- Finance
- Utilities
- Properties
- Commerce and Industry
Index Variation
- The Hang Seng HK 35 focuses on the top 35 Hong Kong-based companies, primarily generating revenue outside Mainland China.
- The Hang Seng Composite Index includes the top 95% of stocks by market cap on the Hong Kong exchange, comprising around 500 stocks.
Major Industries and Components
The following individual industries are represented in the HSI along with their weights:
- Financials (33.58%)
- Information Technology (27.81%)
- Consumer Discretionary (11.23%)
- Properties & Construction (5.83%)
- Energy (4.64%)
- Telecommunications (3.95%)
- Utilities (3.35%)
- Healthcare (3.31%)
- Consumer Staples (2.98%)
- Conglomerates (1.56%)
- Industries (0.97%)
- Materials (0.81%)
Top Holdings
As of December 2023, the top 20 index holdings and their weights were:
- HSBC Holdings (8.61%)
- Alibaba Group Holding Limited (8.29%)
- Tencent (7.49%)
- AIA Group Ltd. (7.23%)
- China Construction Bank (4.64%)
- Meituan (4.48%)
- China Mobile (3.67%)
- HKEX Group (2.98%)
- Industrial and Commercial Bank of China (2.60%)
- Xiaomi Corp. (2.52%)
- Bank of China (2.30%)
- Ping An Insurance Group of China (2.19%)
- BYD Company (2.06%)
- CNOOC Ltd. (1.87%)
- Li Auto (1.87%)
- JD.com Inc. (1.81%)
- Techtronic Industries Co. Ltd. (1.34%)
- CLP Holdings Limited (1.20%)
- Sun Hung Kai Properties Ltd. (1.13%)
- Link Real Estate Investment Trust (1.04%)
Investing in the Hang Seng Index
To invest in HSI, you can consider Hong Kong ETFs such as the iShares MSCI Hong Kong ETF (EWH) and the Franklin FTSE Hong Kong ETF (FLHK). Alternatively, the KraneShares Hong Kong Tech ETF (KTEC) tracks 30 high-tech stocks in the Hang Seng Composite Index.
The Biggest Stock Market in Asia
As of January 2024, China held the title of the largest stock market in Asia with a market capitalization of $8.5 trillion. Following closely, India’s stock market overtook Hong Kong’s, becoming the fourth-largest globally with a market cap of $4.3 trillion.
In Conclusion
The Hang Seng Index (HSI) stands as a crucial benchmark, representing the largest and most liquid companies on the Hong Kong Stock Exchange. With 82 components as of December 2023, it covers about 65% of HKEx’s market cap, solidifying its role as the primary gauge for the exchange’s performance.
Related Terms: Market Capitalization, Blue-chip Stocks, Asia Markets, Investing, Stock Exchange.
References
- Hong Kong Exchanges and Clearing Limited. “Monthly Market Highlights”.
- Hang Seng Indexes Company Limited. “Hang Seng Index”.
- Hang Seng Indexes Company Limited. “Hang Seng Index Fact Sheet”. Page 1.
- Hang Seng Indexes Company Limited. “Company Profile”.
- Hang Seng Indexes Company Limited. “Hang Seng Index Fact Sheet”. Page 2.
- Hang Seng Indexes Company Limited. “Index Methodology, General Guide on Hang Seng Indexes Co Ltd”. Pages 7, 14-16, 22.
- Hang Seng Indexes Company Limited. “Hang Seng Index and Sub-indexes, Index Methodology”. Page 5.
- Hang Seng Indexes Company Limited. “Hang Seng HK 35”.
- Hang Seng Indexes Company Limited. “Hang Seng Composite Index”.
- Bloomberg. “India Tops Hong Kong as World’s Fourth-Largest Stock Market”.
