- Richard Berry
- September 3, 2019
- 12:16 pm
Trading the Hang Seng Index is speculating on the benchmark stock market index of Hong Kong. The index has 50 constituents, including a host of HK-based companies and Chinese firms. The index is maintained by Hang Seng Indexes Company, a private company owned by the Hang Seng bank.
Started in 1969, the index has a long and interesting history. Manias, bubbles, and severe corrections are some of the hallmarks of the index. In 2008, for example, the index lost almost two-thirds of its value.
Currently, some of the biggest companies in the world are included in this index, including HSBC, Tencent, and AIA. The recent listing of Alibaba could see its inclusion into the index soon.
How do you trade the Hang Seng Index?
There are multiple financial products derived from the underlying Hang Seng Index that you can trade with, including:
- Index Futures (HKEX) – Compare futures brokers
- Index Options (HKEX) – Compare options trading platforms
- Exchange-Traded Funds – Compare ETF investing platforms
- Spread trading – Compare spread betting brokers
- CFDs – Compare CFD trading platforms
The biggest ETF based on the HS Index is the HSI ETF (ticker: 2833 HK). This ETF is gaining popularity because of the ease of trading, unlike futures or options where there are rollover costs and expiry dates. The currency of trade is the Hong Kong Dollar (HKD).
On index futures, they usually expire on March, June, September, and December.
- Related guide: Here’s everything you need to know about index trading.
Best brokers for trading the Hang Seng
Below are a selection of the best trading platforms that offer access to the Hang Seng index:
City Index
Types of Hang Seng trading: CFDs, spread betting
City Index Review
Name: City Index
Description: City Index is one of the oldest spread betting and CFD brokers based in the UK. They were founded in 1983 and offer trading in over 13,500 financial markets, to around 126,000 active clients. City Index is currently owned by StoneX, a US brokerage listed on the NASDAQ valued at $1.75bn.
70% of retail investor accounts lose money when trading spread bets and CFDs with this provider.
Why we like them:
City Index offers some of the best trading tools and analysis to help traders perform better. Their unique post-trade analytics and voice brokerage service make it an excellent choice for large and frequent traders.
Pros
- Excellent trading tools
- Voice brokerage
- Publically listed
Cons
- Trading only, no investment account
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Pricing
(4)
-
Market Access
(4.5)
-
Online Platform
(4)
-
Customer Service
(4.5)
-
Research & Analysis
(4.5)
Overall
4.3Capital.com
Types of Hang Seng trading: CFDs, spread betting
Capital.com Review
Name: Capital.com
Description: Capital.com was founded in 2016 and is a CFD trading platform and spread betting broker with offices in the UK and around the world. Since then, they have grown to offer over 3,700 tradable assets to 300,000 active monthly traders. Capital.com won “Best Trading App” in our 2023 Awards.
Why we like them:
Capital.com has an easy-to-use and intuitive trading platform and app, that gives access to the most popular financial markets with competitive spreads with the ability to reduce risk by decreasing your leverage.
Pros
- Innovative and intuitive app
- Set your own leverage
- Proprietary technology
Cons
- Trading only, no ISA or SIPP
- No options markets
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Pricing & Spreads
(4)
-
Market Access
(3.5)
-
Apps & Trading Platform
(4.5)
-
Customer Service
(4.5)
-
Research & Analysis
(3.5)
Overall
4CMC Markets
Types of Hang Seng trading: CFDs, spread betting
CMC Markets Review
Name: CMC Markets
Description: CMC Markets is one of the original spread betting and CFD brokers based in the UK. They have been providing forex trading services since 1989 and are now listed on the London Stock Exchange. The broker has over 300,000 active clients trading online and is operated from 13 global offices, with headquarters in The City of London.
Summary
CMC Markets has always offered, and still does one of the best trading platforms for high-frequency and active traders. It’s a good choice for those that want to trade on tight spreads, with a platform built on exceptional tech.
77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.’
Pros
- Excellent trading platform
- Good liquidity
- Unique sentiment tools
Cons
- Trading only, no investing account
- Limited smaller cap stocks
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Pricing
(5)
-
Market Access
(4)
-
Online Platform
(5)
-
Customer Service
(4)
-
Research & Analysis
(5)
Overall
4.6Pepperstone
Types of Hang Seng trading: CFDs, spread betting
Pepperstone Review
Name: Pepperstone
Description: Pepperstone were founded in 2010 in Australia and have since then grown to be a global brokerage with international offices and around 400,000 active clients. They offer spread betting and CFDs on 1,200 major market instruments, which means they focus on the most heavily traded assets, mainly forex and indices trading. Of those 900 are shares on the major stocks on international exchanges.
75.6% of retail investor accounts lose money when trading CFDs with this provider.
Why we like them
Pepperstone is a good choice for traders that want to automate their trading strategies through MT4. As far as MT4 brokers they are one of the biggest and best and offers so good EA packages.
Pros
- Tight pricing
- Wide range of MT4 markets
- Pre-built MT4 indicator packages
Cons
- Limited market access
- Only third-party platforms
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Pricing
(5)
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Market Access
(3.5)
-
Online Platform
(4)
-
Customer Service
(4)
-
Research & Analysis
(4)
Overall
4.1Saxo Markets
Types of Hang Seng trading: Futures, options, CFDs, spread betting
Saxo Markets Review
Name: Saxo Markets
Description: Saxo Markets is one of the largest CFD brokers worldwide and provides direct market access to equities, bonds, forex, futures and options as well as being a major liquidity and infrastructure provider to wealth managers, banks and smaller brokers.
Why we like them
Saxo Markets is a good choice for more sophisticated traders. The platform, analysis, and direct market access may be too complicated for beginners. But, for experienced traders its coverage, commissions and research are unrivalled.
Pros
- Direct market access
- Low commissions
- Robust trading platform
Cons
- Seen as a trading platform for professionals
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Pricing
(4.5)
-
Market Access
(4.5)
-
Online Platform
(5)
-
Customer Service
(4.5)
-
Research & Analysis
(4.5)
Overall
4.6IG
Types of Hang Seng trading: CFDs, spread betting
IG Review
Name: IG
Description: Founded in 1974 IG are one of the world’s largest margin trading brokers and they offer CFDs, FX and Spread Betting (in the UK) alongside share trading and prime brokerage to over 350,000 active clients and offers 19,000 tradable markets. IG also recently introduce physical share dealing and smart portfolios for longer-term investors.
Why we like it
IG pioneered online trading and financial spread betting for private clients and remains not only one of the largest online trading platforms, but also one of the best. IG stands out through deep liquidity, high market range and excellent added value such as trading tools and analysis.
Pros
- Wide market range
- Excellent liquidity & DMA equities
- Listed on the London Stock Exchange
Cons
- Customer service can be slow
- No DMA futures trading
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Pricing
(4.5)
-
Market Access
(5)
-
Online Platform
(5)
-
Customer Service
(4)
-
Research & Analysis
(5)
Overall
4.7What is the attraction of the HK Hang Seng Index?
One of the most keenly traded indices in Asia is the Hang Seng Index. The index is attractive to investors and traders alike because:
- HSI stocks combines both local and regional exposure, including the exposure to China
- HSI offers good liquidity as some of these stocks are huge (e.g. HSBC, Tencent, and and AIA)
- HSI offers indirect exposure to leading the financial sector and the Chinese economy.
As noted above, many Chinese firms, including State-Owned Enterprises SOEs, are listed in HK. Many of them are financials and telco like CCB, Ping An, ICBC, and China Mobile.
Historically, HSI is a very volatile index which offers scope for short-term trading. Hence its popularity with traders.
What drives the Hang Seng Index?
Stock markets are often driven by a wide variety of factors. For the Hong Kong stock market, the number one factor is global growth. This is because the market is dependent on trade, goods flow, and capital movements. A fall in global trade will hit the market hard.
Other important factors for HKI include:
- Earning factors (e.g., profitability and earnings momentum)
- Technical factors (e.g., new highs or lows)
- Political factors (e.g., street protests)
- Monetary factors (e.g., the peg against the USD)
The latter has been an over-riding factor of late due to the non-stop protests throughout the summer and autumn. The region is falling into a technical recession.
A 7-Point Guide to trading Asian stock indices
Trading Asian stock indices has always a lure for many aspiring traders. In the past, many western observers referred to Japan/HK as the ‘Far East’. But in these days of instant electronic trading, investing in Asian markets has never been easier. But there are some things you may need to watch out for.
- Understand that ‘Asia’ is a very big continent. You have to know which countries you want to invest in. At the minimum, know whether the Asian country you are interested in is a developed, developing or a frontier economy. There are more than 35 countries in Asia, stretching from Japan to Pakistan. So there are a lot of cycles overlapping one another. Other things to watch out for include:
- Economic cycles
- Currency trends (managed, pegged, or free float?) – very important
- Political trends and elections
- Sector niche
- Understand your requirements for trading Asian stocks. Are you in just to get a ‘kick’? Or do you invest for the long term? Are dividends important? This will dictate what you invest in and how you do it.
- Anticipate the market catalysts for buying in (or selling out). In many Asian markets, an election can have a massive positive impact on the local stock market. Modi in India is one example. Shinzo Abe of Japan is another. They bring in new policies that often rejuvenate the economy (at least for a while).
- Research what type of exposure available. Not all Asian markets are available to foreign investors. China used to be a totally closed market but is now gradually opening up. Still, there is a limit. Other countries are more open, such as Singapore and Hong Kong. Therefore, if you are preparing to invest understand how you wish to carry out your transactions. Can you invest locally or through a fund? Can you buy Asian stocks from where you are?
- Identify the sector niche. Not all countries can be competitive in every sector. For Singapore/HK, the bigger sectors are property, banks, insurance etc. For Indonesia and Australia, resource stocks are better. In Korea, tech/chip stocks are worth watching. So before you invest with MSCI country ETFs or indices, you have to know what the constituents are. Check and see if these stocks are what you want to hold.
- Examine the risk and reward. Asian markets are very attractive to many investors simply because of the higher growth rates there. China is growing at 5-6%; so is India. Countries like Vietnam, Philippines, Indonesia all showing promising trends one way or another. However, not all is rosy. You can lose serious amount of money if you overpay for securities. So are you buying blue-chip Asian stocks or are you buying growth stocks? Different type of stocks carry different kind of risks.
- Commit capital but go slow initially. Especially if you’re unsure what or how to trade Asian markets. Drip feed capital into Asian funds or ETFs just to experience the pricing behaviour.
Alternative Indices For Hong Kong (Hang Seng Index) Trading
You can read about the major indices in our guide to the best indices for index trading.
