Hang Seng Index

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The Hang Seng index is the main stock index of the Hong Kong China Stock Exchange. Its identification code or also called RIC Reuters is the HKEX. Companies listed in this index are weighted by capitalization as in the vast majority of global indices.

The HKEX was created by the Hang Seng Bank in 1969 with its base of 100 points and is made up of the largest companies in the Chinese market, representing 65% of the total of the Chinese stock market.

Among the most important companies that make up the index (at the time of writing the article) we can mention one of the largest banks in the world such as the Bank of China, companies in the service sector such as China Resources Power, and industrial companies such as China Unicom, Petrochina Company Limited, COSCO Pacific Ltd and China Coal Energy.

If a company wants to obtain financing and wishes to list on this market, it must be within the range of 90% of companies with the highest capitalization and volume, having been listed on the Hong Kong Stock Exchange for at least 24 months.

This index serves as an underlying asset for investment portfolios and funds, mostly Asian. For example, it serves as the underlying asset for the HSI futures market, trading on the HKFE, which is the Hong Kong Futures Exchange, and has a daily trading hours from 09:45 to 12:30 of the day and from 13:00 until 4:15 p.m. Hong Kong. The HSI futures market has (at the time of writing) an average daily trading volume of 45,000 contracts and the average daily volatility is 280 points. Its historical maximum was on October 30, 2007 trading at 31,958 points.

Example of future Hang Seng

Let's look at a very simple example of calculating the face value and profit or loss on a Hang Seng Future trade.

The futures contract is a standardized contract. There can be the big contract and the small contract. The large contract (at the time of writing) will have a value per point of 50 Hong Kong dollars (HKD) and the small contract of 10 Hong Kong dollars (HKD).

If we want to calculate the nominal volume that we trade with a large contract, we do it through the following formula:

Nominal trading volume = Quote * Value per point

Assuming that the index in future mode is trading at 22,500 points, we will have the following:

Nominal Trading Volume = 22,500 * 50 = 1,125,000 HKD

If we wanted to calculate the profit or loss obtained by a purchase operation at 22,500 and a subsequent sale at 22,550, we would obtain a profit of 50 points. Knowing that the value per point of the large contract is 50 HKD, we would have a profit of 2,500 HKD.

Profit = (22,550 - 22,500) * 50 = 2,500 HKD

Tags:  markets banking accounting 

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