Hang Seng

The Hang Seng is the main equity index of the Hong Kong stock exchange: it shows how, on average, the prices of the largest and most actively traded securities admitted to trading in Hong Kong are moving. Its constituents bring together local Hong Kong groups — banks, insurers, property owners, infrastructure — and mainland Chinese companies that have chosen a Hong Kong listing: technology platforms, state-owned banks, industrial holding companies. That is exactly why the index is regarded both as a barometer of the Hong Kong exchange and as the closest benchmark to the "Chinese market" that is open to foreign capital.

How the constituents are put together

A security's weight in the index is set by its market capitalisation, adjusted for the share of stock in free float, and on top of that a cap on the maximum weight applies: no single issuer can stand in for the whole index. Selection is carried out by a committee under formal rules — sufficient trading liquidity, a minimum listing history and sector representation are required, and the composition is reviewed regularly, with securities that have dropped out being replaced. The sector structure also determines sensitivity: the financial and property development block responds to the cost of money, the technology block to global liquidity and to how the world as a whole views emerging-market risk.

Example: how indices diverge during the day

Daily changes in indices, set side by side, show the main property of a country benchmark: it moves on its own news agenda. The Hong Kong index may rise on a decision by the Chinese regulator on a day when local indices are indifferent to it — comparing daily performance helps to separate general risk appetite from local causes and serves as a practical argument in favour of diversification across markets.

What the index does not show

The Hang Seng is often read as the "China index" as a whole, although the domestic mainland market lives a life of its own and is measured by the CSI 300 index: the instruments, the settlement currency and the rules of access for foreigners are different there, and the correlation is far from one. The second confusion is mixing up the broad index with its sector and "China" sub-families, which carry the same name but are calculated from a different list of securities. Third: the movement of the index and the result in roubles are not the same thing, since the exchange rate is added, and the very possibility of holding Hong Kong securities is limited for a Russian investor by infrastructure and by the regime of blocking sanctions.