With major global stock indexes named after promoter publishing groups like Dow Jones, FT and Nikkei, one would have imagined that Hong Kong’s benchmark would also bear the name of a newspaper title — perhaps a Mingpao or Singtao.
But as it turned out, it was a financial institution — Hang Seng Bank — that carried the torch for the city’s main stock index, serving up a gauge that measures the wealth and well-being of locals.
Launched in November 1969, the Hang Seng Index is compiled and maintained by a wholly-owned unit of Hang Seng Bank.
When the index was first published, its base of 100 was set using July 31, 1964 as the reference day for equity valuations.
Thus, today marks a milestone for the local market to determine how it has fared over the past 50 years.
So, how does the picture look?
On Wednesday, the benchmark index closed at 24,732 points after a seven-day rally that saw daily turnover return to the HK$100 billion level.
The index’s current level means the market has multiplied 247 times over the past half-century.
That is surely a good run by any standard, though the journey has been bumpy at times.
After end-July 1964 was set as the base, the Hang Seng index dropped to a low of 58.61 on Aug. 31, 1967 — in the wake of Leftist riots in the city – before picking up again. The historic high came 40 years later when China’s through-train talk propelled the index to 31,958 on Oct. 30, 2007.
A lot has changed in the past 50 years in Hong Kong with the city surviving five major stock crashes.
It started with the oil crash in 1973 which led the HSI to shed as much as 90 percent of its value at one point. Then there was the 1987 Wall Street crash and the 1997 Asian financial crisis. After that the market suffered due to the SARS outbreak in 2003 and the global financial tsunami in 2008.
Based on the pattern, a stock crash could happen anytime, although we are not sure what exactly will be the trigger. Perhaps it could be Quantitative Easing 4, delay in through-trains, the Occupy Central movement, or even the Ebola virus.
But one thing we know is that Hong Kong can always bounce back from adversity – and as the HSI index has shown — it won’t take too long to recover.
Change is the constant in life. Three quarters of the 30 original HSI constituents stocks have gone; only seven remain from the initial list. They are banking giant HSBC, three utilities (CLP, Power Assets –formerly known as Hongkong Electric — and Hong Kong and China Gas) and three conglomerates (Swire, Wharf and Hutchison Whampoa).
Cheung Kong (Holdings), the flagship of Hong Kong’s richest man Li Ka-shing, which has seen its shares surge to a record high before its interim results announcement today, was yet be listed in the 60s. However, it owned stakes in two of the seven 50-year-old constituent firms, namely Hutchison Whampoa and Hongkong Electric.
Now with the Hang Seng index enlarging to 50 stocks, the benchmark is almost equally split between Hong Kong and China stocks, although China counters are bigger in size.
In fact, Hutchison is the only local company to rank among the top ten in terms of market capitalization. The top five are China Mobile, HSBC, China Construction Bank, Tencent and CNOOC. The top five together make up for over 25 percent of the total market in Hong Kong.
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