Hong Kong Stock Exchange (SEHK)

The Hong Kong Stock Exchange (SEHK) is the sixth-largest stock exchange in the world, based on market capitalisation. As of December 2017, the 2,118 companies listed on the exchange had a market cap of US$4.4 trillion. In terms of market cap, Hong Kong ranks behind only the New York Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the Shanghai Stock Exchange and Euronext.1)Retrieved 24 May 2018 https://www.relbanks.com/stock-exchanges/largest-stock-exchanges

The Hong Kong Stock Exchange dates back to 1866, but the first formal exchange, the Stockbrokers’ Association of Hong Kong, was established in 1891. It was renamed the Hong Kong Stock Exchange in 1914 and a second exchange, the similarly-named Hong Kong Stockbrokers’ Association, was opened in 1921. The two eventually combined in 1947 under the Hong Kong Stock Exchange name.2)Retrieved 17 April 2018 http://www.stockexchangesecrets.com/hong-kong-stock-exchange-history.html

Growth, Expansion And Consolidation

Due to rapid economic growth in Hong Kong, three other exchanges were later opened in the late 1960s and early 1970s. First, there was the Far East Exchange, which opened its doors in 1969. Then, Kam Ngan Stock Exchange launched in 1971, and it was soon followed by Kowloon Stock Exchange, which opened in 1972.

Following pressure to increase the regulation of the various markets, those three exchanges and Hong Kong were consolidated into the Stock Exchange of Hong Kong (SEHK) in 1980, which began trading on 2 April 1986.

In 1976, the Hong Kong Commodity Exchange was created to trade futures in cotton, sugar, soybeans and gold. The exchange was renamed the Hong Kong Futures Exchange (HKFE) on 7 May 1985.

In 1989, the Hong Kong Securities Clearing Company Limited was launched. It created CCASS, the central clearing and settlement system for Hong Kong markets, which started operating in 1992.3)Retrieved 17 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en

Following the October 1987 stock market crash, Hong Kong authorities instituted in 1989 a comprehensive reform of the city’s various securities and commodities exchanges in order to “enhance the competitiveness of the Hong Kong stock exchange and to meet the challenge of an increasingly globalised market.”4)Retrieved 10 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en

The reforms included “the establishment of a more widely representative Council and a strong, professional executive management team, to safeguard the interests of all participants and to operate and develop the market effectively.”5)Retrieved 10 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en

Under the reform, the Stock Exchange of Hong Kong (SEHK), the Hong Kong Futures Exchange (HKFE) and the Hong Kong Securities Clearing Company (HKSCC) were merged under a single holding company, HKEX. The merger took operational effect on 6 March 2000. In December 2012, HKEX acquired the London Metal Exchange, the world’s leading metal market.6)Retrieved 10 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en

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Stock Connect With Shanghai And Hong Kong

In November 2014, the Hong Kong, Shanghai and Shenzhen stock exchanges created Stock Connect, which allows investors to trade securities in each other’s markets through their home exchange.7)Retrieved 6 March 2018 http://www.hkex.com.hk/Mutual-Market/Stock-Connect?sc_lang=en/

The Shenzhen-Hong Kong Stock Connect, launched in late 2016, enables investors in Hong Kong to buy Shenzhen-listed stocks, while Chinese investors can buy Hong Kong-listed equities. A similar Shanghai-Hong Kong Stock Connect was launched in late 2014.8)Retrieved 6 March 2018 https://www.cnbc.com/2016/12/04/shenzhen-hong-kong-stock-connect-will-benefit-institutional-investors-experts.html/

Leading Companies Listed On The Exchange

There are a number of major companies listed on the exchange, but the largest companies based on market cap in Hong Kong dollars are:

  1. Microsoft: HK$4.5 trillion
  2. Tencent Holdings: HK$3.8 trillion
  3. China Construction Bank: HK$1.9 trillion
  4. Intel: HK$1.6 trillion
  5. HSBC: HK$1.6 billion
  6. China Mobile: HK$1.5 trillion
  7. Cisco: HK$1.3 trillion
  8. AIA Group: HK$853 billion
  9. Amgen: HK$720.6 billion
  10. CNOOC: HK$607.2 billion9)Retrieved 24 May 2018 http://www.hkex.com.hk/Market-Data/Securities-Prices/Equities?sc_lang=en&sort=0

Hang Seng Index

The Hang Seng Index is the main index that tracks the performance of the stocks traded in Hong Kong.

The index has been published since 1969 and is maintained by a subsidiary of Hang Seng Bank, which is now majority owned by HSBC Group. It covers about two-thirds of the exchange’s market capitalisation and includes 40 of the largest individual companies. The components of the index are divided into four subindexes: commerce and industry, finance, utilities, and properties.10)Retrieved 24 May 2018 https://www.bloomberg.com/quote/HSI:IND

Summary

The Hong Kong Stock Exchange is the sixth largest stock exchange in the world based on market capitalisation. It dates back to the mid-1800s and has undergone several mergers and consolidations with other exchanges since then. It now includes the city’s futures and commodities exchanges as well as equities. The Hang Seng Index is the main index that tracks the major equities traded on the exchange and is one of the most widely followed equity indexes in the world.

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. FXCM will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

References   [ + ]

1. Retrieved 24 May 2018 https://www.relbanks.com/stock-exchanges/largest-stock-exchanges
2. Retrieved 17 April 2018 http://www.stockexchangesecrets.com/hong-kong-stock-exchange-history.html
3. Retrieved 17 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en
4, 5, 6. Retrieved 10 April 2018 http://www.hkexgroup.com/About-HKEX/Company-Information/About-HKEX/History-of-HKEX-and-its-Market?sc_lang=en
7. Retrieved 6 March 2018 http://www.hkex.com.hk/Mutual-Market/Stock-Connect?sc_lang=en/
8. Retrieved 6 March 2018 https://www.cnbc.com/2016/12/04/shenzhen-hong-kong-stock-connect-will-benefit-institutional-investors-experts.html/
9. Retrieved 24 May 2018 http://www.hkex.com.hk/Market-Data/Securities-Prices/Equities?sc_lang=en&sort=0
10. Retrieved 24 May 2018 https://www.bloomberg.com/quote/HSI:IND