We always know that Index is a weighted approach to represent some movements in the financial markets. Yet, as always we will say: HSI went up 1% today, which is not an ordinary day for the markets. However, do we really know how indexes is calculated? Here we are going to explore how HSI is calculated and the component stocks that it's made up of (accurate as of 18th Dec 2020).
Some facts as below:
1. The Hang Seng Index (“HSI”) serves as a market benchmark that reflects the overall performance of the Hong Kong stock market.
2. The HSI is a free float-adjusted market capitalization weighted index with a cap on individual constituent weightings.
3. The number of constituents is fixed at 50.
4. The formula of the HSI is set out below.
5. The HSI is a price index without adjustments for cash dividends or warrant bonuses.
6. As for the weightage, the below snapshot of their November fact sheet shows the sensitivity of it.
|HSI Constituent Stocks (accurate as of 18th December 2020)|
a. For the latest list of Hang Seng Index Constituents, we can always refer to: http://www.aastocks.com/en/stocks/market/index/hk-index-con.aspx
b. Hang Seng Indexes website provide a monthly factsheet updates etc. Head on to https://www.hsi.com.hk/eng/indexes/all-indexes/hsi
From the above table, you can see that collectively, Tencent (10%), Alibaba (4.4%), AIA (10.1%), Ping Ann (5.6%), Xiaomi (4.3%), HSBC (8.9%) and HKEX (4.8%) forms 48% of HSI. For those who trades HSI futures, you may put more focus on the 7 companies as mentioned in order to know where the index will end or move. By harnessing target prices (views from fund houses like JP Morgan, Morgan Stanley etc), there is a good bet that we know in 3-6 months' time where the index will be.