Hang Seng Index (HSI)

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Hang Seng Index (HSI)

The Hang Seng Index (HSI) is Hong Kong’s benchmark equity index, tracking the performance of the largest and most liquid companies listed on the Hong Kong Stock Exchange (HKEx). Established in 1969, the HSI serves as a barometer for the Hong Kong economy and a widely cited indicator for Asian markets.

What the HSI Measures

  • Free-float market capitalization–weighted index of leading Hong Kong stocks.
  • Designed to reflect leadership and liquidity on HKEx, covering roughly 65% of the exchange’s total market capitalization.
  • Managed by Hang Seng Indexes Company Limited, a subsidiary of Hang Seng Bank.

Key Features and Methodology

  • Constituents: The index targets the largest, most liquid stocks; the number of constituents can change. As of December 2023, the HSI included 82 stocks.
  • Weighting: Free-float-adjusted market-cap weighting with an 8% cap on any single stock to prevent dominance.
  • Calculation: Price index calculated in real time (updated every two seconds during HKEx trading hours). It is a price return index (does not adjust for cash dividends or warrant bonuses).
  • Governance: A committee reviews components quarterly and makes additions or removals to keep the index representative.

Sector Breakdown (approximate weights as of Dec 2023)

  • 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%
  • Other sectors (Industrials, Materials, etc.): remaining weight

Leading Constituents (top 20 by weight, Dec 2023)

  • HSBC Holdings: 8.61%
  • Alibaba Group Holding: 8.29%
  • Tencent: 7.49%
  • AIA Group: 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: 2.52%
  • Bank of China: 2.30%
  • Ping An Insurance: 2.19%
  • BYD Company: 2.06%
  • CNOOC Ltd.: 1.87%
  • Li Auto: 1.87%
  • JD.com: 1.81%
  • Techtronic Industries: 1.34%
  • CLP Holdings: 1.20%
  • Sun Hung Kai Properties: 1.13%
  • Link Real Estate Investment Trust: 1.04%

Variations and Related Indexes

  • Hang Seng HK 35: Focuses on 35 large Hong Kong-based companies with significant non–Mainland China revenue exposure.
  • Hang Seng Composite Index: Much broader index that covers about 95% of HKEx market capitalization (roughly 500 stocks).

How Investors Gain Exposure

Investors can access exposure to Hong Kong equities and the HSI through ETFs and index-tracking products. Examples include:
– iShares MSCI Hong Kong ETF (EWH)
– Franklin FTSE Hong Kong ETF (FLHK)
– Sector-specific or thematic ETFs (e.g., technology-focused funds tracking Hong Kong listings)

Why the HSI Matters

  • Represents the health and sentiment of Hong Kong’s equity market and, by extension, provides insights into broader regional trends.
  • Its composition—heavy in financials and large Chinese-tech and mainland-linked companies—means it’s sensitive to both local Hong Kong economic conditions and developments in mainland China.

Bottom Line

The Hang Seng Index is the primary benchmark for Hong Kong equities: a free-float market-cap-weighted index with mechanisms (quarterly reviews and an 8% cap) to maintain balance and representativeness. It offers a concise view of the largest, most influential companies listed on HKEx and is a common reference point for investors monitoring Asian markets.