The sixty largest businesses that trade on the Hong Kong Exchange (HKEx) are included in the free-float market capitalization-weighted Hang Seng Index or HSI.
With a combined market worth of more than $38 trillion as of 2022, HKEx is one of the biggest stock exchanges in the world. It is usually used as a gauge of Asian markets more generally and is usually viewed as the benchmark stock market index for Hong Kong.
What is HSI?
A market capitalization-weighted stock market index for Hong Kong is known as the Hang Seng Index (HSI). It is free-float adjusted. It is the primary indicator of the performance of the Hong Kong stock market as a whole and is used to track and record daily changes in the top businesses listed on the Hong Kong stock exchange. About 58% of the capitalization of the Hong Kong Stock Exchange is made up of these 66 member companies.
Hang Seng Indexes Company Limited, a fully owned subsidiary of Hang Seng Bank, one of the major banks registered and listed in Hong Kong in terms of market capitalization, compiles and maintains the HSI, which was established in November 24, 1969.
Hang Seng China Enterprises Index, Hang Seng China AH Index Series, and Hang Seng Total Return Index Series are just a few of the stock indexes that it is in charge of creating, publishing, and managing. Even though Hang Seng is a publicly traded corporation, HSBC Holdings plc, another listed international banking institution, controls it. The Index includes HSBC Holdings and Hang Seng as components.
HSI Classification System
The Hang Seng Industry Classification System, formerly known as the Hang Seng Stock Classification System, is a thorough system created by Hang Seng Indexes Company Limited for the Hong Kong stock market. It displays the stock performance across several industries. With a mapping to an international industry categorization, it preserves international compatibility while catering to the unique features of the Hong Kong stock market.
General guidelines for classification:
- The key factor used to classify stocks is the sales revenue generated by each company unit. When profit or assets better represent the company’s operations, they will also be taken into account.
- A company will be categorized into several sectors based on the source of its primary sales income (or profit or assets if relevant).
- A stock’s industry sector will be reclassified if the company’s operations have experienced a significant change, such as a significant merger or acquisition.
How To Calculate HSI?
HSI is calculated using the following formula:
Details about the parameters:
- P(t): The price as of day t
- P(t-1): Day’s Closing Price (t-1)
- (IS) – Issued Shares (In the case of H-share components, only the H-share part is taken into consideration)
- FAF: Freefloat-adjusted Factor, which is updated quarterly and ranges from 0 to 1.
- CF: Cap Factor, a quarterly adjustment that ranges from 0 to 1.
- With a combined market worth of more than $38 trillion as of 2022, HKEx is one of the biggest stock exchanges in the world.
- A market capitalization-weighted stock market index for Hong Kong is known as the Hang Seng Index (HSI).
- HSI displays the stock performance across several industries.
- A stock’s industry sector will be reclassified if the company’s operations have experienced a significant change.