November 13

The HSI Is Showing Signs of Recovery

As the world looks to move past the coronavirus pandemic and its devastating economic fallout, many have trained their eyes on East Asia.

This is the part of the world where the initial outbreak occurred, and thus the region that has had the longest time to manage the crises and start to recover.

Potential Recovery of HSI

So far, that recovery has been marked by mixed success. In Hong Kong in particular there have actually been some warning signs in recent weeks and months.

The region has seen a few minor spikes in cases, and is currently taking steps to shore up border control and decrease the likelihood of a major spread.

At the same time however, what constitutes a spike in Hong Kong — a little more than a dozen cases — pales in comparison to the COVID surges parts of the world are still seeing (for context, recent coronavirus updates from around the world show that the U.S. has been topping 100,000 cases per day of late).

Where we may be seeing the strongest signs of an Asian recovery though — and a recovery in Hong Kong specifically — is in the Hang Seng Index.

For those who may be unfamiliar with this index or its significance, trading in the HSI essentially represents the biggest and most influential companies listed in Hong Kong.

The HSI Index

These are bundled into a single index that can be traded as one entity — meaning that its movement reflects trends in the biggest players in the Hong Kong economy, rather than just the share price of one company or another.

To give a slightly better idea of what the HSI entails, the following are some of the most significant companies in the index:

  • Tencent Holdings Ltd. – Tencent, a company known for gaming but prominent in other areas of entertainment, as well as mobile payment and A.I., is by far the HSI’s most valuable listing.
  • Wuxi Biologics Cayman Inc. – Wuxi is a company specializing in technology platforms related to biomedical development — one industry that is actually thriving amidst the pandemic.
  • Alibaba Group Holding Ltd. – The largest e-commerce company in Asia and a blockbuster IPO not long ago, Alibaba is a newcomer in the HSI, but already one of its most valuable listings.
  • Hang Seng Bank Ltd. – The Hong Kong-based financial services company has retained relatively strong value despite the overall struggles of banking institutions in 2020.

Many more companies make up the HSI, but these are some of the most prominent and valuable listings that help to dictate the overall direction and power of the index. For instance, Tencent and Alibaba in particular appear to have helped to drive a recent uptick in the index pricing.

That uptick has been significant, and is starting to look prolonged — which is ultimately why we’re looking at the HSI as a potential sign of economic recovery from the pandemic.

From September 24th through October 23rd, the HSI rose from HKD 23,046 to HKD 24,950 (roughly an 8% leap in a single month).

Then, after a brief drop, the index rose again from HKD 24,136 on October 30th to HKD 26,609 on November 8th (about 10% in a little over a week).

All in all, these numbers show roughly a 15.5% leap from the last week of September through the first week of November.

Conclusion

By no means do those numbers guarantee that the HSI will continue to perform well in the weeks or months ahead.

Anything can happen, particularly with a pandemic lingering around the world. But with the HSI representing not one stock but a bundle of influential companies, those gains are encouraging signs.

It is at least possible that we’ll look back at them as signals of a broader recovery to come.


Tags

Alibaba, hang seng bank, HSI Index, tencent, Wuxi Biologics


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