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Hang Seng Index (HSI, 恒生指數) is a capitalization-weighted stock market index in the Hong Kong Stock Exchange. It is used to record and monitor daily changes of the 33 largest companies of the Hong Kong stock market and as the main indicator of the overall market performance in Hong Kong. These companies represent about 70% of capitalization of the Hong Kong Stock Exchange.
HSI was started on November 24, 1969, compiled and maintained by HSI Services Limited, which is a wholly-owned subsidiary of Hang Seng Bank, the second largest bank listed in Hong Kong in terms of market capitalisation.
It is responsible for compiling, publishing and managing the Hang Seng Index and a range of other stock indexes, such as Hang Seng Composite Index, Hang Seng HK MidCap Index, etc.
On January 2, 1985, four subindices were established in order to make the index clearer and to classify these 33 constituent stocks into 4 distinct sectors. They are namely:
Hang Seng Finance Index
Hang Seng Utilities Index
Hang Seng Property Index
Hang Seng Commercial & Industrial Index
The Hang Seng Composite Index Series (恒生綜合指數) was launched on October 3, 2001, targeting on providing a broad standard of the performance of the Hong Kong stock market. Comprising the top 200 listed companies in terms of market capitalisation, it is composed of the geographical series and the industry series. The market capitalization of these companies accounts for about 97% of the total capitalization of the stocks in Hong Kong.
To ensure fairness in its activities, the HSI Services established the Independent Advisory Committee to give advice on issues regarding the management of HSI. The Committee keeps reviewing the constituent stocks of HSI. Usual changes are expected.
The Hang Seng Stock Classification System is a comprehensive system designed for the Hong Kong stock market by HSI Services Limited. It reflects the stock performance in different sectors. It caters for the unique characteristics of the Hong Kong stock market and maintains the international compatibility with a mapping to the FTSE Global Classification System, which is compiled and administered by FTSE International Limited.
General Classification Guidelines:
i) The sales revenue arising from each business area of a company is the primary parameter of stock classification, and the net profit will also be taken into consideration to determine whether that company's business runs well.
ii) A company will be classified into different sectors according to its majority source of sales revenue.
iii) Re-classification of a stock's Industry Sector will occur once the company's business has undergone a major change, such as, substantial merger or acquisition.
Industry Sectors:
Source of Information
The classification of each stock is based on the information available to the public, for examples the annual reports and company announcements.
HSI constituent stocks are selected with the use of extensive analysis, together with external consultation. To be qualified for selection, a company:
Among the eligible candidates, final selections are based on their:
The current Hang Seng Index is calculated from this formula:
<math> Current Index= \frac{Today's Aggregate Market Capitalisation}{Yesterday's Aggregate Market Capitalisation} \times Closing Index<math>
Descriptions on parameters:
Remarks: the base index and the base day is 100 and 31 July, 1964 respectively.
People keep watching the following reports for investment activities:
The representativeness of the HSI can be studied by the turnover of the whole stock market and by how much its market capitalisation covers. The aggregate market value of the HSI constituent stocks is maintained at approximately 70% of the total market value. This coverage ratio is a postive sign when compared with major overseas stock indices.
The representativeness of the HSI can also be observed by its resemblance with the movements of the All Ordinaries Index (AOI) compiled by the SEHK, which includes all listed stocks on the SEHK.
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