What Is the Hang Seng Index (HSI)? Definition and Statistics

What Is the Hang Seng Index (HSI)?

The Hang Seng Index, or HSI, is a free-float market capitalization-weighted index of the largest companies that trade on the Hong Kong Exchange (HKEx).

HKEx is one of the largest stock exchanges in the world, with an aggregate market cap of more than $31 trillion as of December 2023, down 0.3% from November’s $31.1 trillion.

The HSI is widely considered to be the benchmark equity market index for Hong Kong and often a barometer of Asian markets more generally.

Key Takeaways

The Hang Seng Index is a benchmark for blue-chip stocks traded on the Hong Kong stock exchange.
As of December 2023, the index was composed of 82 stocks.
It is organized into the four sub-sector indexes of finance, utilities, properties, and commerce and industry.
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 quoted indicator of the Hong Kong economy. It’s often used as a market benchmark for Hong Kong investors.

The index launched in 1969. Its base period was July 31, 1964, when it was valued at 100. HSI aims to reflect the leadership of the Hong Kong exchange and covers approximately 65% of its total market capitalization.

Because of Hong Kong’s status as a special administrative region of China, there are close ties between the two economies, and many Chinese companies are listed on the Hong Kong Exchange.

HSI is owned and managed by Hang Seng Indexes Company Limited, which is a wholly-owned subsidiary of Hang Seng Bank.

As of December 2023, the five largest constituents of the Hang Seng Index were HSBC Holdings, Alibaba, Tencent, AIA Group, and China Construction Bank.

The Hang Seng Index Structure

The HSI is a free-float-adjusted market capitalization-weighted index. Its value is calculated and disseminated in real time at two-second intervals during the trading hours of the HKEx. The HSI is classified as a price index without adjustments made for cash dividends or warrant bonuses.

The index targets the largest and most liquid stocks trading on HKEx. The number of constituents can vary from one period to another. As of December 2023, there were 82 stocks in the index.

HSI companies also fall into one of four sub-indexes: finance, utilities, properties, and commerce and industry.

To prevent any particular security from dominating the index, the HSI has an 8% capping rule. That’s the maximum percentage of relative weighting that any single security may have.

A committee convenes quarterly to evaluate the index components and to decide if companies should be added or removed.

Index Variations

The Hang Seng HK 35 is an index of just the top 35 Hong Kong-based companies that generate most of their revenues outside of mainland China.

The Hang Seng Composite is an index of the top 95% of stocks trading on the Hong Kong exchange by market cap, comprising around 500 stocks.

A subsidiary of the Hang Seng Bank has maintained the Hang Seng Index since 1969.

Industries and Components

The individual industries covered by the HSI, along with their weights, are:

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 weightings 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%)

How Many Stocks Are in the Hang Seng Index?

As of December 2023, the HSI was composed of 82 of the largest (by market cap) stocks traded on the Hong Kong Stock Exchange. The exchange, for reference, lists the stocks of around 2,600 companies.

How Do You Invest In the Hang Seng Index?

You can invest in the HSI via Hong Kong ETFs such as the iShares MSCI Hong Kong ETF (EWH) and the Franklin FTSE Hong Kong ETF (FLHK). The KraneShares Hong Kong Tech ETF (KTEC) tracks 30 high-tech stocks in the Hang Seng Composite index.

What Is the Biggest Stock Market in Asia?

As of January 2024, China’s stock exchange was the largest equity market in Asia, with an $8.5 trillion market capitalization. On Jan. 22, 2024, India’s stock market overtook Hong Kong’s to become the fourth-largest stock market in the world, with a market cap of $4.3 trillion.

The Bottom Line

The Hang Seng Index (HSI) is a benchmark index made up of the largest and most liquid companies that trade on the Hong Kong Stock Exchange, or HKEx. As of December 2023, it tracked 82 companies and covered about 65% of the market cap of the exchange.

The HSI is considered to be the primary gauge of the performance of the HKEx.

Source link