Hang Seng – Index

HIS-MAR21
Min Spread *
250
Target Spread *
250
Leverage/Margin
1:20
Commission
0
Swap point Long/Short
-277.23 / -120.71
Nominal Value of one lot
10
Trading hours
04:15 - 07:00 & 08:00 - 11:30 & 12:00 – 18:30

Instrument description

China is one of the largest countries by area and population, and in the last two decades, the economy of the country has developed considerably, and China is regarded as the world’s leading economy. The stock exchange of a country is the measure of economic health and growth of the country, but unlike the rest of the world, the stock market in China does not reflect the true economy of China.

The stock market system in China is not similar to Dow Jones, NASDAQ, or New York Stock Exchange (NYSE), and two exchanges that operate in China are the Shanghai and Shenzhen exchanges that were introduced in 1990 to help modernize and develop the economy of China. The Hong Kong Stock Exchange (HKE) was integrated with the Shanghai Exchange in November 2014.

According to statistics, the majority of the companies that feature in the stock exchange are owned by the state, and the Chinese population owns merely 7% of the stocks. The Shanghai Stock Exchange (SSE) is the largest in China, with a market capitalization worth more than $4 Trillion. The SSE is located in the financial capital of China, Shanghai, and includes most of the state-owned companies.

The Shenzhen Stock Exchange (S.Z.) is a relatively smaller exchange but is located in Shenzhen, which is one of the most modern cities in China and an almost two-hour drive from Hong Kong. The market capitalization of S.Z. is around $3.36 Trillion. The S.Z. consists of individual investors who are running entrepreneurial businesses. The S.Z. comprises of innovative and technology-related companies similar to that of NASDAQ.

The Hong Kong Exchange (HKE) is recognized as both a stock and a derivative market. The index that tracks the value and direction of the Hong Kong stock exchange is called ‘Hang Seng or HSI.’ The HKE is situated in Hong Kong, which was under the ruling of the U.K. government, but power was transferred from the U.K. to China in 1997. But, Hong Kong has its own currency (Hong Kong Dollar), its own legislative system, and its own judicial system until 2047. Mainland China only selects the administrator of Hong Kong.

History of China H-Shares Index

The China H-shares Index Future is based on the Hang Seng Index Future and therefore called the Hang Seng China Enterprises Index (HSCEI). The main purpose of the HSCEI is to track and monitors the daily trading of H-shares among the top 40 companies listed in the Hong Kong stock exchange. The HSCEI Index Futures was launched on December 8, 2003, based on the HSCEI, which is part of the bigger Hang Seng Index.

The Hong Kong stock exchange (HKE) was integrated with the Shanghai Stock Exchange in November 2014 by the Chinese government through the Shanghai Hong Kong Connect program. The HKE was also integrated with the Shenzhen stock exchange in 2016. As most of the mainland stock exchanges in China are closed to foreign investment, the ‘Connect Program’ was launched with emphasis to allow foreign investors to buy and trade stocks of Chinese companies. Today, many of the companies are listed in both Shenzhen and Hong Kong exchanges, but to attract mainland investors, the share prices are lower in HKE as compared to S.Z.

The HKE has a market capitalization of more than $23 Trillion with nearly 1902 listed companies, and also recognized as the global Initial Public Offerings (IPO) venue. The Hang Seng Index or HSI tracks the 40 largest companies that are listed and traded in the HKE. The Hang Seng Bank manages the HSI since 1969. The HSI covers more than 60% of the total market capitalization. The companies in the HSI are classified into four categories or sub-indices based on particular business sectors that include Finance, Utilities, Commerce and Industries, and Real Estate Investments.

A committee meets after every quarter to review the performance of the 40 listed companies and decide to add or remove the companies based on their market performance. As the Hang Seng Index is a market cap, the bigger companies have more influence on the value of the index as compared to smaller companies. Some of the popular companies in the HSI are Tencent, China Mobile Limited, China Construction Bank, Bank of China, and Ping An Insurance.

  • What are H-Shares

The shares of the Chinese incorporated companies that feature in HKE are called ‘H-shares.’ There are many companies incorporated in China that trade their shares simultaneously on the HKE and one of the two, Shanghai Stock Exchange or Shenzhen Stock Exchange.

The Chinese government controls the H-shares, but the shares are valued in HKD (Hong Kong Dollar) and traded like other shares on the HKE. The traders and investors get a chance to avail H-shares from more than 230 Chinese companies working in various sectors of the market, such as industries, finance, technology, and utilities.

  • What is the difference between A-shares and H-shares

The shares of the Chinese companies listed and traded in the Shanghai and Shenzhen exchanges and quoted mostly in the Chinese Yuan are called ‘A-shares,’ and any foreign investment is first regulated through Qualified Foreign Institutional Investor system. On the other hand, the shares of Chinese companies listed and traded in Hong Kong stock exchange and quoted in Hong Kong Dollars (HKD) are called ‘H-shares,’ and investors can freely trade the shares.

How the value of China H-Shares Index is calculated

The Hang Seng Index (HSI) is one of the biggest Index in Asia and a free float-adjusted market-cap- index similar to most indices in the world. The main function of the HSI is to record and monitor the daily changes in the performance of the companies that feature in the HKE. The HSI is the indicator of the overall market performance of the companies. But there are certain rules, and that is that no company can represent more than 10% of the index value.

The value of the HSI is measured through market capitalization, which is multiplying the share price with the number of shares. The value of the Hang Seng Index is also measured through the free-float factor. The trading hours of HSCEI are divided into three timings slots, which are

  • 9:15 A.M - 12:00 P.M
  • 1:00 P.M - 4:30 P.M
  • 5:15 P.M - 3:00 A.M

How to read the price change in China H-Shares Index

The China H-shares chart or HSCEI Futures chart showed a Bullish trend from January 2020 to February 2020, and the Index value remained between ranges of 10000.0 to 11000.0 points. The HSCEI Futures Index reached the highest value of 11419.91 on January 17, 2020. But there is a clear downward and Bearish trend being the lowest value of 8559.64 was observed on March 19, 2020. The HSCEI Futures Index last traded at 9758.63 HKD. The Bid price is 9633.9, while the Ask price is 9610.5.

How to trade in China H-Shares Index

The Hong Kong stock exchange (HKE) is not only one of the leading index in Asia, but it also allows traders and investors wide exposure and chance to access the big economy of China. There are different ways to invest in the Hang Seng Index, such as Exchange Traded Funds (ETFs), spread bets, Options, Futures Contracts. The HSCEI Futures and Options allows traders and investors to implement both long and short term strategies. There is also a low transaction cost.

Another popular way to invest is by using Contract for Difference (CFDs), which is a derivative financial instrument and allows you to speculate the price difference of the underlying asset without having to own the asset. The CFDs also give you the option of using leverage where with a small initial deposit, you can trade a larger position.

With CFDs, trade can be made in both directions, which going Long or Short when predicting the rise or fall in the price of the share. If you believe that the market will rise, then you will go long or Buy, and if you think that the market will fall, then you will go short or sell. CFDs due to leverage give a chance of magnifying profits, but there are equal chances of magnifying losses, so a risk management strategy can be implemented.

What causes the price change of the China H-Shares Index?

Like every other global index, the Hang Seng Index is influenced by many micro and macro-economic factors. As Hong Kong is closely linked with China, so any positive or negative change in the Chinese economy is noticed in the Hong Kong stock exchange and impact on the Hang Seng Index. One of the crucial factors is the relationship of the Chinese Yuan with U.S Dollar and other global currencies.

The numerous economic factors that determine the value of the index include interest rates, inflation, Gross Domestic Product (GDP), and the individual performance and growth of the listed companies in the index. Apart from the fundamental factors, the value of index and market directions is considerably affected by the domestic and international political news and events. Many times the political events may be unrelated to the Chinese economy but still affect the index; for example, the news of the U.K. leaving the European Union, popularly known as ‘Brexit,’ caused a staggering 1000 points to drop in the Hang Seng Index.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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