The Hang Seng Index is the market capitalization weighted benchmark stock market index for Hong Kong with a base value of 100 set on 31st July 1964 and launched on 24th November 1969. The Hang Seng Index, the most widely quoted gauge of the Hong Kong stock market, includes the largest and most liquid stocks listed on the Main Board of the Stock Exchange of Hong Kong.
The index is calculated using the Weighted Average Market Capitalization methodology where the price multiplied by the free float gives the market capitalization of its constituents. The base value of the index is 100 on 31st July 1964. The weightage of each company is arrived at by dividing the market capitalization of each company with the total market capitalization of all the 50 companies.
Stocks are freefloat-adjusted for investibility representation and 15% capping is applied to avoid single stock domination in the index. The larger the market weightage of the company the larger is the impact due to 1% change in its price on the index. The Hang Seng Index is calculated and disseminated real-time at 2-second intervals during the trading hours of the stock exchange of Hong Kong.
A stock is eligible for constituent selection if it fulfils the following eligibility criteria-
· The Market Value of each individual stock refers to the average of month-end Market Values for the past 12 months of any review period.
· An eligible stock must be among those that constitute the top 90 percentile of the total Market Value of the Universe.
· For each stock, its turnover in the past 24 months is to be assessed for eight quarterly sub-periods.
The turnover requirement adopts a scoring approach and the details are as follows:
· For each quarterly sub-period, a stock will be regarded as passing the turnover requirement in that period if it is among the top 90 percentile of the aggregate market turnover of the Universe.
· Two points will be assigned to each “pass” achieved over the latest four sub-periods whereas one point will be assigned to those attained over the former four sub-periods.
· The highest score for turnover requirement is 12 points. Stocks should obtain at least 8 points to meet the turnover requirement.
The index composition is reviewed on a quarterly basis at the end of March, June, September and December months. Effective dates of constituent changes will be the next trading day after the first Friday of March, June, September and December.
Financials constitute 45.61% followed by Energy at 9.72%, Properties and Construction at 9.61%, Information Technology at 9.05%, Telecommunications at 7.05%, Consumer Services at 4.9%, Utilities at 4.84%, Consumer Goods at 4.58%, Conglomerates at 4.05%, Industrials at 0.59% and Materials at 0.01% for the sector allocation in the index.
The Hang Seng has given a return of 12.96% on a year on year basis and has gained 1.76% from year to date. The index reached an all-time high of 31,638.22 during October 2007. The index has a Price to Earnings ratio of 10.76 in the current scenario. HSBC Holdings has the highest weightage of 14.75% in the index followed by Tencent with a weightage of 8.18%, CCB with 6.42%, AIA with 6.27%, China Mobile at 6.13% and Bank of China at 3.93% while others have less than 3.5% weightage each in the index.
Top Ten Constituents for Hang Seng Index