Hang Seng Index: Share Price, Chart and Forecast
If you were to use a single quantity as an indicator of Hong Kong's economic strength, what would it be? Paramount among all other indicators is the Hang Seng Index, the daily de facto numerical tracker of Hong Kong's economy, also used by investors in the region as the market benchmark. This article will go into depth about the Hong Kong Exchange. From its history to its strengths and price, you will know everything in order to trade the Hang Seng optimally.
What is Hang Seng Index?
Hong Kong is one of the world’s leading financial centres and most free economies with international financial markets, near-free port trade, and low taxation. These have made the Hong Kong Stock Exchange the 6th largest globally and the 3rd largest in Asia. International traders interested in this market often observe the Hang Seng Index, which tracks the region’s top companies.
Hang Seng Index Definition
The Hang Seng Index is a stock market index consisting of 50 of the most liquid and largest companies listed on the Hong Kong Stock Exchange. The index accounts for 40 percent of the stock market’s total market cap. This index was designed to mimic the general performance of the stock market. Thus, it offers international investors a quick peek into the health of the Hong Kong Stock market, which can be pretty hard to do if they were to evaluate individual equities.
How is the Hang Seng Index price calculated?
The Hang Seng Index calculation is done at two-second intervals using a free flat adjusted equation during the Hong Kong Stock Exchange's trading hours. The equation takes into account issued shares, closing prices, and current prices. The maximum weighting for a company is 10 percent. This ensures no particular firm has too much control over the index.
Hang Seng Index Today and History
The Hang Seng Index was 1st published in November 1969. The index started out at 100 points. Since its inception, the Hang Seng has become the most widely quoted indicator of the general price movements in the Hong Kong stock market.
Hang Seng Historical Evolution
When the Hang Seng Index Stock was launched in 1969, it started with only 33 constituents. This number increased to 38 in 2007, when the Hang Seng Index Company started including H-shares companies. The Hang Seng was then gradually expanded until it hit 50 constituents in 2012 when the number of listed firms in the Hong Kong stock exchange was around 1380.
On March 1, 2021, Hang Seng Index Company announced proposals to enhance the Index in a manner that ensures it remains an essential benchmark and representative of the Hong Kong stock market. This will mean an increase in the number of constituents, which will increase gradually from 50 to 100. The current target is to hit 80 components by mid-2022. By adopting this new selection, the Hang Seng Index now should be able to include less sizable companies and reach an appropriate level of representation for every industry.
The Hang Seng Index Price Evolution
While it's true that your investment decision shouldn't be just inspired by past results, looking at a firm's historical stock performance can help understand the company's general perception as well as its future prospects. Thus, let’s evaluate the Hang Seng price evolution over the years.
Hang Seng Index Chart
Hang Seng Index Price History
When the Hang Seng was 1st published in 1969, its 100 points base was equivalent to the index stocks' overall value as of the end of July 31, 1964.
26 years later, in 1993, the Hang Seng Index crossed the 10,000 milestone for the first time since its inception. Then, 13 years later, in 2006, the Hang Seng hit the 20,000 point milestone and, less than ten months later, in 2007, it crossed the 30,000 points milestone.
On October 8, 2008, the Hang Seng Index stock closed at 15,431.70 points, the lowest closing value in more than two years. Two weeks later, the Hang Seng Index price fell even lower to 10,676 points. But this downward trend didn't last long.
On July 24, 2009, Hang Seng Index news showed that the stock had passed the 20,000 points mark again, before hitting a high of 25,201 on the same day. The Hang Seng price kept hitting new highs, such as another milestone in April after rising to over 28,000 points.
That said, in August 2015, it entered a bear market. The index's price hovered between 18,000 and 19,000 points until the bear market ended in February 2016, and the index's price rose to the all-time high of 33,223.58 points in January 2018.
What Influences the Price of Hang Seng ?
- Because of Hong Kong's proximity to mainland China and the many Chinese firms in the Hang Seng Index, political and economic backdrops in China play a key role in the stock's price movements.
- The Yuan’s fluctuations can also directly impact the performance of the Chinese firms listed, thus affecting the overall index itself.
- Another factor worth noting that'll influence the price of the Hang Seng Index is stock market crashes. That said, index funds like the Hang Seng Index have always bounced back after even the worst market crashes
The Hang Seng Index Companies
For stocks to be considered for inclusion in the Hang Seng, they must first be subjected to thorough analysis as well as lots of external consultation. The minimum requirements that all companies need to meet to be qualified include:
- A listing history of more than 24 months
- Be among the firms making up the top 90% of total turnover on the Hong Kong Stock Exchange
- Be among the firms composing the top 90% of total market value for all ordinary shares
- Then, the final selection process begins. Here, the final results will be picked based on the companies'
- Representation of the respective Hang Seng sub-sectors we touched on earlier
- Financial performance
- Turnover rankings and market capitalization
Hang Seng Index List of Stocks
|China Construction Bank||Financials||CICHY|
|Hong Kong Exchanges and Clearing||Financials||HKXCF|
|Industrial and Commercial Bank of China||Financials||1398.HK|
|Techtronic Industries||Consumer Discretionary||TIB1.F|
|BYD company||Consumer Discretionary||002594.SZ|
|Bank of China||Financials||BACHF|
|Anta Sports||Consumer Discretionary||AS7.F|
|Sunny Optical Technology Company||Industrials||2382.HK|
|Geely Auto Group||Consumer Discretionary||0175.HK|
|CK Hutchison Holdings||Conglomerates||0001.HK|
Should I Trade the Hang Seng Index? Points to Consider
Here are several things you ought to consider before you trade the Hang Seng index.
The index declined significantly in 2021
2021 has been a tough year for all stocks on the Hong Kong stock exchange. As result, Hang Seng has crashed by 20% from its highest level this year. We can attribute two main reasons for Hong Kong stocks' decline.
First, China has been targeting some of the biggest players in the nation's technology sector with stringent rules and regulations.
Second, the decline has also been caused by the Evergrande situation. Evergrande has a debt of over $300 billion, and its collapse is expected to negatively impact property groups, including Hang Seng Index constituents Hang Lung, Country Garden and New World.
Another reason is that shares of casino companies like Galaxy Entertainment have crashed, as traders react to the new Covid wave in Macau.
The volatility of the index
If you've keenly gone through the price history section above, then Hang Seng Index's volatile history needs no introduction. Have the Hang Seng Index's volatility in mind to ensure you make a final, well-informed trading decision.
Hang Seng dividends
Dividend yields measure how much returned cash investors will get for every dollar invested. Fortunately, the Hang Seng index tracks some of the largest stocks in China, many of which pay out regular and impressive dividends. Some of the highest yielding dividend stocks on the Hang Seng Index include MTR Corporation, Power Assets Holding, and CK Asset Holdings.
How Can I Trade the Hang Seng Index ?
How do I put my money in the Hang Seng? Here’s a step-by-step guide on how to invest in HSI.
First, you'll need to find the best online trading platform. To be a profitable investor, you need to pick a broker that perfectly aligns with your trading style, educational needs and investing goals. This is particularly true if you're a new investor.
ZFX fortunately fulfils all these criteria. This broker offers all MetaTrader 4's features, competitive spreads, and non-dealer executions Follow the step-by-step instructions below to register as a ZFX customer and start investing in the Hang Seng Index.
Step 1: Open an Account with ZFX
Visit the official ZFX homepage, and at the top click on "Open an account". If you're a novice trader or investor, feel free to click on "Try Demo" instead, to practice for free before you invest your funds. It'll allow you to develop a solid trading strategy that you can test out in a risk-free environment.
After making your pick, you'll get redirected to a registration form, where you'll enter all your personal information. Then, come up with a strong password, and hit the "Next" button.
Then, select the account type you'd prefer and tick a box if you agree to ZFX's terms and agreement. When you're done, click the "Sign Up Now" button at the bottom of the page. Ensure you store your MT4 login code and password in a safe and private place.
Step 2: Verify Your Account
Before getting started trading the Hang Seng Index on ZFX, you'll need to submit your documents for verification. To do this, click on the link "Personal Information" from your dashboard. From the dropdown that appears, click "Document Verification," and you'll be taken to a page like the one above. ZFX will then verify your identity.
Step 3: Fund Your Account
To fund your account click the "Deposit" label at the topmost area of the page. The icon should be easy to find on your profile dashboard.
Step 4: Start Trading the HSI
After completing all steps above, hit the "Download MT4" button as shown in the image above, and install it on your device. MT4 offers an intuitive user interface and range of advanced trading functionalities, and is designed to suit traders of all experience levels.
After installing the program, log in using the details you saved earlier. Subsequently, find the Hang Seng Index Live chart under the HK50 ticker and start investing.
Tips and Things to Know Before Investing in Hang Seng
Here are a few things to consider as you start trading the Hang Seng .
- Know the Hang Seng Market Hours
The Hang Seng Index is open between 9:30 am and 4 pm local time on weekdays, with an hour's lunch break at noon.
- Follow economic data and socio-political events
In regards to economic data, the Hang Seng traders and investors should follow the Chinese GDP figures as well as measures of industrial production like PMIs and trade balance statistics.
- US-China relationship
The US-China relationship can be a significant driver of the Hang Seng Index price. A strained relationship between the two nations has exerted downward pressure on the market. This was evident in 2018 when the Hang Seng Index plunged as concerns over the two nations' slow progress toward reaching a trade deal unsettled investors.
Hang Seng Future, Forecast, and Predictions
1 - Recommendations and Forecasts of Analysts
"This is the largest ever reform of the Hang Seng Index," Dickie Wong, head of research at Kingston Securities, told the Financial Times when commenting on Hang Seng's move to double its components. "Expect more and more Chinese companies to be included and more and more Hong Kong companies to get excluded," he added.
Lots of experts and analysts also praised Hang Seng Index’s Company's move to cap an individual stock's weighting at 8 percent (down from 10 percent.) These analysts believe that this will ensure no one company's performance can impart an outsized influence on the benchmark's overall performance, which should, in turn, reduce the stock price's volatility.
2 - Analysis of Hang Seng from a Fundamental and Technical Perspective
On the daily chart, the Hang Seng saw a recent bounce off of the 24,830 level. This previous resistance level is now serving as the support. This is also expected to draw some technical buyers from the Fibonacci 61.8 percent retracement level. With the MACD (Moving Average Convergence Divergence) indicator showing showcasing higher lows, it's a sign that a downward momentum is weakening in the near term.
Hang Seng Index's fundamentals don't look bad either. Broadly, Hang Seng Index's customers are regional and local, while traders or Hang Seng Index's futures and options are global. Perhaps the index's most "captive" customers are employees in Hong Kong who have to contribute to local MPF (Mandatory Provident Fund) retirement saving schemes.
Hang Seng Index is also tracked by at least 11 inverse & leveraged products, ten distinct ETFs, and many other funds. Going forward, options and futures traders in London and New York are expected to start using the Hang Seng for all their "go-to China H-share indexes.”
3 - Primary Support and Resistance Levels
Looking at the Hang Seng chart, what stands out is the evident bearish trend that has pushed prices lower. At the moment, the 61.8 percent Fibonacci retracement of the April 2020 – Feb 2021 rally near 25,000 points continues to provide support.
That said, note that the index might encounter some resistance at 26,000 points, where a recent attempt to break through the level in early August was unsuccessful.
Bottom Line: Is Hang Seng a Good Investment Now?
At the end of the day, that is for you to decide. That said, it’s generally a popular investment, considering all of Hang Seng Index's positive aspects. Mainly, it offers a diversified portfolio of 50 distinct blue-chip stocks, which allows you to limit your exposure risk.
Ready to invest? You can trade the Hang Seng safely and quickly through ZFX, following the steps outline in this article.