The Hang Seng 50 is an index comprising 50 of the largest and well-performing companies on the Hong Kong Stock Exchange. This index can be used to assess the overall performance of the Hong Kong market. Hang Seng 50 trading exposes a trader to the largest and most liquid stocks in Hong Kong.
What is the Hang Seng Index?
The Hang Seng Index is a stock index comprised of 50 of the largest companies listed on the Hong Kong Stock Exchange (HKSE). This index is used as a determinant of the overall performance of the Asian market.
The Hang Seng Index was created in 1969, and it is managed by the Hang Seng Indexes Company, a subsidiary of the Hang Seng Bank. The companies included in this index are weighted depending on their market capitalization.
This index functions similarly to other popular global stock indices like the UK FTSE 100 and the German DAX. It is important to note that this index is not the same as the Hang Seng China Enterprises Index. The latter tracks the performance of the 50 H-share Chinese mainland stocks listed on HKSE.
The maximum weighting allocated to a company on the Hang Seng 50 Index is 10%. The number of companies included in this index is expected to increase. In March 2021, Hang Seng Indexes said that the number of constituent companies would increase to 80 by mid-2022 and later to 100.
How often do Hang Seng Index companies change?
The Hang Seng 50 index is reconstituted quarterly. After each quarter, the index is reviewed and analyzed, after which consultations are made to admit or omit companies. During the review phase, the index could be retained as it previously was, or it could be changed.
Companies that are included in this index need to meet certain criteria. The factors analyzed include market capitalization, financial performance, turnover and representatives. The company must also be listed on the Hong Kong Stock Exchange for at least three months.
What are the HS50 trading hours?
The HS50 trading hours are between 9:30 am and 4:00 am Hong Kong time from Monday to Friday. There is a lunch break between 12.00 pm and 1:00 pm Hong Kong time during these trading hours. Some brokerage firms could also provide exposure to weekend trading hours.
How is the Hs50 calculated?
The HS50 is calculated by analyzing the market capitalization of all the listed companies on the Hong Kong Stock Exchange. Many factors are taken into account when calculating this index. These factors include the market value of each company stock, the number of available shares, and the stock’s closing price on the previous day.
Stocks included in this index need to be included in the top 90% of the total turnover at the Hong Kong Stock Exchange. The stocks should also be listed on the exchange for more than two years.
The HS50 index is calculated in real-time at two-second intervals. The index is calculated during the trading hours of the exchange. During the quarterly review, qualified companies are listed on the index.
What are the benefits of Hang Seng 50 trading?
The Hang Seng Index is one of the most popular market indexes in the Asian financial market. The index offers a wide range of benefits, including the following:
- Good for day trading – The Hang Seng 100 index exposes a trader to volatility and regular price changes. Therefore, it attracts many day traders looking to benefit from the short-term price movements.
- High trading volumes – The trading volumes of the Hang Seng 100 index are significantly high compared to other global indexes. The high trading volumes mean that the index is liquid, and trades are easy to execute.
- Keeps up with China’s economic growth – The Hang Seng 100 index exposes a trader to China’s economic environment. The economy of China has grown significantly over the past years, and this index allows a trader to be exposed to this growth.
- Better than buying individual stocks – Investing in Hang Seng 50 is better than trading in the individual shares of companies in Hong Kong. The index is diversified into the top 50 companies in Hong Kong that are performing well.
What are the Drawbacks of Hang Seng 50 trading?
Hang Seng 50 trading comes with a lot of potential drawbacks. Assessing these drawbacks is vital to helping a trader make an informed trading decision. These drawbacks include:
- Political risk – China is an emerging market that is sometimes exposed to heightened political tensions. This can affect the performance of companies operating in Hong Kong, leading to the poor performance of the HS50.
- State interference – In Hong Kong and Mainland China, there is a high number of businesses that are owned by the state. Any intervention by the government regarding these businesses can affect the performance of the Hang Seng index.
- Volatility – While the high volatility might be good for day traders, it may not be ideal for traders who do not want such kind of exposure.
What drives the Hang Seng 50’s price?
The Hang Seng 50 index price is affected by a wide range of factors. A trader must analyze these factors because it makes it easier to know the best time to enter or exit a trade. Hang Seng 50’s price is driven by the following factors:
As a proactive trader, you need to look for when the companies listed on the index release their earnings reports. Analyze these earnings reports to note any significant changes that could affect the market capitalization of the companies listed on the index.
If the company’s earnings report shows that the market cap has changed by a significant margin, it can affect the weight that the company will have in the HS50. This can also drive the prices of the index.
Interest rate hikes
Interest rates usually affect the performance of financial markets. When the interest rates drop, the markets tend to rise, and when the interest rates go up, the markets tend to drop, which affects the performance of company stocks, and in this case, the Hang Seng Index.
Interest rates do not always affect the price of stock indexes such as the HS50. However, it is still important to stay informed about these interest rates so that you are not caught unawares by any volatility in the market.
Sometimes, the interest rate can be changed by the central bank. Central banks usually change the interest rates to combat financial situations such as rising inflation to maintain the value of a nation’s currency.
Moving currency prices
The Hong Kong Stock Exchange is dominated by currencies such as the HKD, CHY and the JPY. The strength of these currencies can affect the stocks of companies listed on Hang Seng or affect the index’s performance.
Most of the companies listed on HS50 have global operations. This means that their revenues are affected by exchange rates. If the exchange rates keep fluctuating, the price of the Hang Seng index will also be affected.
The value of the Hong Kong dollar is also regulated by the Hong Kong central bank and the Hong Kong Monetary Authority. These institutions monitor the value of the HKD to control the banking liquidity and regulate the company inflows and outflows.
Economic data and readings
The Hang Seng price is largely driven by the economic events happening in China. The performance of Chinese companies listed on the index will be reflected in the gains or losses on the index.
When looking at the economic status, evaluate factors such as trade wars and the political backdrop in China. These occurrences can play a significant role in the index’s price movements, and staying informed can aid a trader in making the right decisions.
For instance, in June last year, the price of the HS50 index increased by 1.1% following the expansion of manufacturing activities in China during the previous month. This depicts why being informed about these occurrences can give you an insight into the index’s future performance.
Trade the news
News releases tend to affect global financial markets, including the HS50 index. Such news includes the Coronavirus outbreak. When the pandemic broke out between February and March 2020, the index’s price dropped by around 10.3%. Such dips were also witnessed across other stock indices.
The other crucial news to follow is the trading relationship between the US and China. When the relationship between these two countries is trained, the HS50 index can take a notable dip.
At the beginning of 2021, the stocks of leading telco companies in China, such as China Mobile and China Telecom, were temporarily removed from trading at the New York Stock Exchange (NYSE). This news led to the stocks of these companies dropping on the Hang Seng Index.
How to trade Hang Seng 50
There are many ways that one can trade Hang Seng 50. These trading instruments will allow you to trade in this index by taking a single position. When choosing the ideal trading strategy for you, you should evaluate factors such as the risk you are exposed to and the complexity of the trading instruments.
Hang Seng Index CFDs
One can trade the Hang Seng Index 50 using contracts for difference (CFDs). CFDs are derivatives that allow you to speculate on the price movement of an underlying asset. If you take a CFD position, in this case, the underlying asset will be the Hang Seng Index.
With CFDs, you are not taking ownership of the asset. You are speculating whether the index price will go up or fall. If your prediction is correct, you will have made a profit.
Making a Hang Seng trade with a CFD comes with tax benefits. Moreover, it allows you to make traders regardless of whether the market is falling or rising. With CFDs, you can take a long position if you predict that the price will rise or a short position if you think the market will fall.
Hang Seng Index Futures
You can also make a Hang Seng trade using futures contracts. When traders take a futures position, they are obligated to exchange an asset at a predetermined price at a future date.
When you take a futures position with the Hang Seng Index, your contract will be settled in cash because no underlying physical asset will be exchanged. The Hs50 is just an index with only numbers representing a group of stocks.
Trading index futures is preferred by long-term traders. It allows them to hold their trading positions without worrying about overnight funding charges. Instead, these charges are included in the spread.
Hang Seng Index Options
You can also trade the Hang Seng index using options. Options are contracts that will give you the right but not the obligation to buy and sell the HS50 index at a predetermined price at a given future date.
If you want to trade the Hang Seng Index using options, you can use CFDs. This way, you will be taking a speculative position about the future value of the index without buying the index.
Hang Seng Index Stocks and ETFs
It is also possible to trade Hang Seng 50 using exchange-traded funds (ETFs) or index stocks. You will be trading the stocks listed on the Hang Seng Index individually with the latter. It will also allow you to focus on specific areas of interest.
The other alternative is ETFs. Trading an ETF will allow you to take advantage of the short-term price movements of the 50 company stocks on the index. As aforementioned, the HS50 is volatile, and an ETF imitating the index’s composition can stand as a good choice.
Trading an ETF is similar to trading stocks. ETFs track the underlying asset or basket of assets. You can also trade HS50 ETFs using CFDs, which amplifies your exposure because you will be trading on leverage.
Tips for Hang Seng 50 trading
When you want to increase the chances of making profits when trading Hang Seng 50, you can consider certain tips and strategies. Some of the popular tips for trading Hang Seng 50 include the following:
- Select a trading style – Before trading Hang Seng 50, it is important to consider the trading style. The trading styles you choose should align with your risk appetite and the time you will spend trading. There are many trading styles in the market, and each one is unique to a trader’s needs.
- Use indicators to make technical analysis – The other tip is to use indicators to make a technical analysis of the performance of the Hang Seng Index. Using indicators will allow you to create chart patterns and detect trading signals and trends in the market. Technical analysis is recommended for a proactive trader.
- Analyze charts and price action – The other tip when making a Hang Seng 50 trade is to use price charts that will enable you to determine the market sentiment. If you are a new trader, you should take your time to learn how you can use charts to predict where the price of the index will be headed towards.
- Adopt risk management strategies – you should also have risk management strategies in place. These strategies will prevent you from making extreme losses when the market fails to perform as expected.
- Choose the right brokerage platform – Last but not least, you should go with a brokerage platform that best meets your needs. For instance, a platform that gives you trading alerts will notify you when a criterion has been met for you to enter or exit trading positions.
Why Trade Hang Seng 50 with Prime XBT?
PrimeXBT is an award-winning platform that enables you to trade Hang Seng 50 and a wide range of other indexes, commodities, crypto and forex. Below are some of the top reasons why you should use PrimeXBT to trade Hang Seng:
- User-friendliness – One of the top reasons to trade on PrimeXBT is that it has plenty of user-friendly features. The minimum deposit needed to trade on the platform is significantly low. Moreover, the platform’s interface is user-friendly, making it easy for a new trader to navigate.
- Low fees – PrimeXBT charges low trading fees. Having low trading fees ensures that you will not incur massive deductions when making trades.
- Secure – PrimeXBT also comes with a high level of security. When you deposit your funds on the platform and execute trades, you can be assured of safety and the privacy of your personal details.
- Access to charts and tools – Trading on PrimeXBT is also convenient for both new and expert traders because it gives you access to charts and tools that will aid in your decision-making.
In-class trading – PrimeXBT allows you to trade a wide range of assets, including stock indices, commodities, forex and cryptocurrencies.
Is it wise to invest in Hang Seng China 50?
The Hang Seng 50 index is one of the most popular stock indices. It allows a trader to access top-performing companies in Hong Kong and China. It is a wise investment for traders that want this kind of exposure, but it is also important to take note of the political and economic risks.
What is HKEX?
HKEX is the abbreviation of the Hong Kong Exchanges and Clearing Limited. It is one of the world's largest exchange groups by market capitalization.
What are the major indices related to the Hang Seng 50 index?
The other global indices similar to Hang Seng 50 are the UK FTSE 100 and the German DAX. The UK FTSE 100 is an index comprising the shares of the 100 largest companies by market capitalization listed on the London Stock Exchange. The German DAX is composed of the 40 largest and most liquid companies trading at the Frankfurt exchange.
What does the Hang Seng Index price mean?
The Hang Seng Index price is determined by the performance of the 50 largest companies listed on the Hong Kong Stock Exchange. The price is calculated at two-second intervals during the trading hours of the HKSE.
What should you know before trading the Hang Seng 50?
Before trading this index, you should understand that it is different from other popular indexes such as S&P500 and the NASDAQ 100. The index comes with a high level of volatility that could be ideal for day traders. While the index is based on the Stock Exchange of Hong Kong, it is largely driven by events in Mainland China.