The Hang Seng Index and Hang Seng Tech Index: A Closer Look at Their Recent Gains

The Hang Seng Index (^HSI) and Hang Seng Tech Index (^HSTC.L) have been making headlines with their impressive gains, with the Hang Seng Index extending its gains to 2.98% and the Hang Seng Tech Index expanding its increase to 5.08%. Let's delve into the factors driving these gains and explore the current valuations of these indices compared to their historical averages and other major global indices.



Driving Factors Behind the Recent Gains

1. Economic Recovery and Stimulus Measures: The gradual recovery of the Chinese economy and the introduction of economic stimuli by the Chinese government have boosted market sentiment, contributing to the performance of the Hang Seng Index.
2. Interest Rate Cuts: Anticipated interest rate cuts by the US Federal Reserve and the Hong Kong Monetary Authority have improved financial and property market sentiment, benefitting retail and office leasing momentum.
3. Quality First and Support for Technology and Innovation Sectors: The focus on quality and support for technology and innovation sectors in the A-share market has driven listings and contributed to the performance of the Hang Seng Tech Index.
4. Sino-US Trade Arrangements and China's Economic Performance: Progress in Sino-US trade arrangements and China's economic performance have also played a role in the outlook for the Hong Kong market.
5. Improved Leasing and Investment Activity: The recovery in leasing and investment activity, particularly in the retail and office sectors, has contributed to the overall performance of the Hang Seng Index.

Current Valuations and Comparisons

1. Hang Seng Index (^HSI):
* As of 2024-10-04, the Hang Seng Index was 17,811.52, with a year-to-date return of 14.84%.
* The 10-year annualized return of the Hang Seng Index is -1.41%, while the S&P 500 Index has an annualized return of 11.41% over the same period.
* The current value of the Hang Seng Index is below its 10-year average of 17,965.75 and its 5-year average of 20,358.71.
* Compared to other major global indices, the Hang Seng Index has underperformed the S&P 500 Index in terms of annualized returns over the past 10 years.
2. Hang Seng Tech Index (^HSTC.L):
* As of 2024-10-04, the Hang Seng Tech Index was 5227.13, with a year-over-year growth of 39.17%.
* The Hang Seng Tech Index has a long-term average of 5,082.48 and an average annualized growth rate of +4.63%.
* The current value of the Hang Seng Tech Index is below its long-term average, but it has shown significant growth compared to its value one year ago (3816.15).
* Compared to other major global technology indices, such as the NASDAQ-100 or the S&P 500 Technology Select Sector Index, the Hang Seng Tech Index has shown strong performance in recent years, but its long-term average growth rate is lower than these indices.

In conclusion, the recent gains in the Hang Seng Index and Hang Seng Tech Index can be attributed to various factors, including economic recovery, interest rate cuts, and support for technology and innovation sectors. While the current valuations of these indices are below their historical averages, the Hang Seng Tech Index has shown strong performance compared to other major global technology indices. As investors, it is essential to stay informed about the market trends and make proactive decisions to capitalize on the opportunities presented by these indices.