Many people are now planning to invest in Hong Kong stocks, as investing in the Hong Kong market allows access to many high-quality stocks. For instance, many top-tier tech IPOs from mainland China are about to list on the Hong Kong stock market, making it an excellent opportunity to participate in IPO subscriptions. However, when trading Hong Kong stocks, it’s essential to pay special attention to the Hang Seng Index. So, what exactly is the Hang Seng Index, and how should we correctly interpret it? Let’s take a closer look below.

1. A Benchmark for the Hong Kong Stock Market
   To put it simply, the Hang Seng Index is a benchmark used to measure the performance of the Hong Kong stock market. This index is calculated and compiled by Hang Seng Bank. Often, investors can gauge the current market trends just by observing the Hang Seng Index, which is akin to monitoring the overall market. The index is derived by selecting 43 listed companies in the market, using their issued shares as weighted factors to calculate an average stock price index. This provides an accurate reference for assessing market conditions.

2. Correctly Interpreting the Hang Seng Index
   As investors, we must learn to correctly interpret the Hang Seng Index to aid our Hong Kong stock investments. By observing the rises and falls of the Hang Seng Index, we can often discern the price trends of various stocks, helping us adjust our investment strategies accordingly. However, we should also note that if a constituent stock of the Hang Seng Index is suspended for a month, it will be removed from the index. In such cases, the Hang Seng Index can no longer reflect that stock’s performance.

3. Selection Criteria for the Hang Seng Index
   In general, stocks included in the Hang Seng Index are large-cap stocks, as the selection criteria are quite stringent. Typically, a stock must rank in the top 90% of the total market capitalization based on the average of the past 12 months. Additionally, it must have been listed on the Stock Exchange of Hong Kong for at least 24 months, and its trading volume over the past 24 months must also rank in the top 90%. Simply put, these stocks are representative of the broader market.

The above explains what the Hang Seng Index is. If you want to excel in trading Hong Kong stocks, paying attention to the Hang Seng Index is crucial. Give it a try!