How to trade and invest in the HS50

The Hang Seng 50 (HS50) is a measure of the performance of the 50 largest companies on the Stock Exchange of Hong Kong (SEHK). Here, we explain how to trade the HS50 and cover some trading strategies and tips.

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Trading and investing in the HS50

You can gain exposure to the HS50 by trading or investing. Your choice may depend on your personal preference and risk tolerance, or the trading hours of the index. The differences between the two methods are summarised in the table below:

Trading the HS50 Investing in the HS50
Ways to trade CFDs Buying ETFs or shares outright
Market hours 24/7 with IG1 9.30am to 4.00pm (Hong Kong time), Monday to Friday
Initial capital required 10% of trade size 100% of trade size
Losses can exceed deposits Yes No
Timeframe Shorter term Longer term
Liquidity Higher liquidity offered by trading the index than investing in ETFs

IG also offers weekend trading hours on the HS50, from 8am on Saturday to 8.40pm on Sunday (UK time).

Trading the HS50

If you want to get direct exposure to the Hang Seng 50’s price movements, you may choose to trade, rather than invest. You can trade the index via CFDs which enable you to speculate on upward or downward price movements.

To open a CFD position, you’ll need a deposit, called margin. This deposit gives you exposure to the full value of the trade, which means your profits and losses will be magnified and losses can exceed deposits.

Investing in the HS50

If you want to invest in the Hang Seng 50, you can buy shares in ETFs that track the price of the index or shares of individual constituents. You can make a profit if you sell your assets after the share price goes up, and you could also receive dividend payments if made.

Investments require the full value of the position upfront, because you are taking ownership of the underlying assets.

Ways to trade the Hang Seng 50 with IG

When trading with IG, you can get exposure to an index’s price by trading the following:

Cash index CFDs

By choosing to trade cash index CFDs, you trade the current price of the underlying market, known as the spot price. Cash indices offer narrower spreads than other markets, which is why they are often preferred by short-term traders. However, if these traders do not close their positions by the end of the trading day, they will be charged an overnight funding fee.

Index futures CFDs

When you trade HS50 futures CFDs, you agree to trade the index at a specific price at a fixed date in the future (i.e., the expiry date). Index futures are preferred by longer-term traders because they can hold positions without incurring overnight funding charges, as these are included in the spread. Index futures are always settled in cash, as there’s no physical underlying asset to deliver.

Ways to invest in the HS50

With an IG share trading account, you can get exposure to the HS50 by investing in:

ETFs

When you invest in a HS50 ETF, you are essentially spreading your capital out across all 50 companies on the Hang Seng 50. ETFs are traded in a similar way to stocks, but they track an underlying asset or basket of assets.

Stocks

You can invest directly in constituents of the HS50 with the aim of selling them for a profit later. By owning the shares you may earn income from any dividend payments, and gain shareholder rights.

With IG, you can enjoy flexible access to more than 13,000 markets, including ETFs and individual shares.

What moves the HS50’s price?

The HS50 index's price is moved by factors such as:

  • Economic events - Given the proximity to China and the large number of Chinese companies dominating the HS50, one can expect the economic and political backdrop in the country (including trade wars) to play the key role in the index’s price movements.
  • News - News, such as reports surrounding the coronavirus outbreak, can have a significant impact on the price of the HS50 index. For example, between February and March 2020, at the height of the pandemic, the index declined by about 10.3%.
  • Earnings reports - When constituents of the Hang Seng 50 release their earnings reports, it’s important to note if there are any big changes to each company’s market capitalisation. If so, and the company has significant weight in the HS50, it can sway the index’s price.
  • Interest rate decisions - Generally, when interest rates go down, markets tend to rise and when interest rates go up, the market reacts negatively. This can also be true for the HS50, but it is not a guarantee. Stay abreast of interest rate decisions by major central banks as it can cause some short-term volatility in the market.
  • Currency rates and fluctuations - The strength of currencies, such as HKD, CHD and JPY have a direct impact on the performance of the companies within the HS50, and thus the index itself. This is because the constituents of the HS50 do business with countries across the world, which means their income is dependent on various exchange rates. If these rates fluctuate often, the index’s price will also be affected.

Traders should always use a combination of fundamental analysis and technical analysis before trading the HS50, and follow their trading plan and risk management strategy.

HS50 trading strategies and tips

  • Choose your trading style: Decide how you want to trade the index by choosing a trading style based on your risk appetite and how much time you have available. There are four main trading styles , suited to different types of traders
  • Examine charts and price action: Use HS50 price charts to assist in determining market sentiment. Knowing how to use charts when trading can help you to estimate what the index price might do next
  • Conduct technical analysis using indicators: learn how technical analysis and indicators can help you identify chart patterns, trading signals and trends in the market
  • Set trading alerts: Set criteria for the HS50 and get notified when the criteria are met. This way, you can trade instantly if you think the market has reached the right price

HS50 overview

The HS50 is a capitalisation weighted-index, made up by the 50 largest and liquid companies on the Hong Kong Stock Exchange (SEHK). This means that the larger component stocks will find a greater influence upon the overall index.

Representation for each stock is capped at 10% to avoid any single stock dominating the index. The 50 component stocks can be grouped into four categories forming their own sub-indices: finance, utilities, properties, and commerce and industry. A review of the index is conducted quarterly.

How is the HS50 calculated?

The HS50 is calculated by measuring the market capitalisation of all the companies listed on the Stock Exchange of Hong Kong (SEHK). The calculation takes various factors into account, such as the current value of each stock, the closing price of the previous day, and number of shares available.

Constituent stocks must be among the top 90% of the total turnover on the SEHK and have a listing history of at least two years. The index is calculated in real-time at two-second intervals during the trading hours of the exchange. The 50 companies that qualify are listed on the HS50.

What are the HS50 trading hours?

The Hang Seng trades between 9.30am and 4pm Hong Kong time (11.30am to 6pm AEST) Monday to Friday. There is an hour lunch break between 12pm to 1pm (2pm to 3pm AEST).

With IG, you can trade the HS50 from 8am Monday to 7am Saturday (AEST), non-stop.

We also offer a Weekend Hong Kong HS50 market, which is available from 5pm on Saturday to 7.40am on Sunday (AEST).

FAQs

You can trade the HS50 via CFDs on cash indices or index futures. When trading cash indices, you deal at the current price of the underlying market and when trading index futures, you choose to trade the HS50 at a specific price on a specific date.

Before trading the Hang Seng 50, do your research and understand how the index works – how it’s calculated and what affects it price. Then, decide whether you want to trade or invest in the index. Try out IG’s demo platform or open a live trading account if you’re ready to take on the live markets.

Companies get onto the HS50 by having a market capitalisation that is among the top 50 on the SEHK. If the share price of a company drops significantly, negatively affecting its market capitalisation, it could drop off the HS50 list. The opposite is true if share prices go up. A new company could make it onto the HS50, causing another company to lose its place.

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1 24/7 means all week apart from ten hours from 10pm Friday to 8am Saturday (UK time), and 20 minutes just before the market opens on Sunday.