What Is the Hang Seng Index (HSI)?
The Hang Seng Index or HSI is a free-float market capitalization-weighted index of the sixty largest companies that trade on the Hong Kong Exchange (HKEx). HKEx is among the largest stock exchanges in the world, with an aggregate market cap of more than $45 trillion as of 2021.
It is widely considered the benchmark equity market index for Hong Kong, and often a barometer of Asian markets more generally.
- The Hang Seng Index (HSI) is a benchmark for blue-chip stocks traded on the Hong Kong stock exchange.
- The index is composed of four sub-sector indices in industry, finance, utilities, and real estate investment trusts.
- The index uses a free-float market capitalization weighting scheme with a 10% cap on any one component's index weight.
Understanding the Hang Seng Index
The Hang Seng is the most widely quoted barometer for the Hong Kong economy and is often used as a market benchmark for Hong Kong investors. 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.
The index aims to capture the leadership of the Hong Kong exchange and covers approximately 65% of its total market capitalization.
How the Hang Seng Index Is Structured
The HSI is a free-float-adjusted market capitalization-weighted index that is calculated and disseminated real time at two-second intervals during the trading hours of the Hong Kong stock exchange (HKEx). The HSI is classified as a price index without adjustments made for cash dividends or warrant bonuses.
An 8% capping is applied to avoid any single stock domination of the index. The index targets 60 stocks, but the exact number of constituents can vary slightly at any given time. As of December 2021, there were, in fact, 64 stocks in the index. A committee convenes on a quarterly basis to evaluate the index components and decide if companies should be added or removed.
The largest constituents of the Hang Seng Index include Tencent, Alibaba, Industrial and Commercial Bank of China, Meituan, and the China Construction Bank.
Hang Seng members also fall into one of four sub-indexes, including commerce and industry, finance, utilities, and properties.
The Hang Seng HK 35 is a sub-index of just the top 35 Hong-Kong based companies that also 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 maintains the Hang Seng Index and has done so since 1969.
Hang Seng Components
The top thirty holdings in the Hang Seng Index as of December 2021 were (in no particular order):
- Xiaomi Corporation
- New World Development Company Limited
- Sun Hung Kai Properties Limited
- Longfor Group Holdings Limited
- China Petroleum & Chemical Corporation
- Hengan International Group Company Limited
- China Resources Land Limited
- The Hong Kong and China Gas Company Limited
- CLP Holdings Limited
- CSPC Pharmaceutical Group Limited
- AIA Group Limited
- Alibaba Group Holding Limited
- AAC Technologies Holdings Inc.
- ANTA Sports Products Limited
- Hang Lung Properties Limited
- Industrial and Commercial Bank of China Limited
- China Life Insurance Company Limited
- WuXi Biologics (Cayman) Inc.
- Alibaba Health Information Technology Limited
- CITIC Limited
- Techtronic Industries Company Limited
- CNOOC Limited
- China Mengniu Dairy Company Limited
- CK Infrastructure Holdings Limited
- Country Garden Services Holdings Company Limited
- Henderson Land Development Company Limited
- Li Ning Company Limited
- Galaxy Entertainment Group Limited
- Sands China Ltd.
How Many Stocks Are in the Hang Seng Index?
The Hang Seng Index (HSI) is composed of the 60 largest stocks traded on the Hong Kong Stock Exchange; although, at any given time, there may be slightly more or less than 60. The Hong Kong Exchange, for reference, has the stocks of around 2,500 companies listed.
How Do You Invest In the Hang Seng Index?
If you don't live in Hong Kong, you can still 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.
What Is the Biggest Stock Market in Asia?
Japan's stock exchange is the largest equity market in Asia, and second place belongs to the Shanghai Stock Exchange in mainland China. The Honk Kong Exchange comes in third, followed by China's Shenzen Exchange.