As Chinese stock market volatility is directly reflected on the Hong Kong stock market, Australian broker Pepperstone has announced that it will start offering a new index to its clients, tracking the performance of shares in the region.
The company has officially added two new CFDs to its offering starting from today, with the Hong Kong 50 (HK50) and the Russell 2000 (US2000).
The Hang Seng 50 measures the performance of the 50 largest companies traded on the Hong Kong Stock Exchange. Recent moves on the Chinese stock market have contributed to wild volatility in Hong Kong with the index dropping 20 percent from its double top marked in April and May.
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The value of companies tracked by the index constitutes about 60 percent of the total stock market value of firms traded on the Hang Seng Exchange. Major names such as HSBC, China Construction Bank and China Mobile are among its constituents with financials playing a particularly substantial role – close to half of the companies are included in the index.
Pepperstone has also added the U.S.Russell 2000 Index, which represents the value of the 2,000 smallest companies among the top 3,000 U.S. listed firms. With the current valuation of the index approaching 80 times price to earnings ratio, the Russell 2000 arguably has way more potential for volatility than the blue chip stocks in the U.S..
Looking at the Hang Seng 50, the index is currently trading at a price to earnings ratio of about 11, with a dividend yield totaling 3.46 percent.
According to the official Pepperstone announcement, “The HK50 has not followed the exuberance found in mainland China’s indices – staying relatively flat over the last few years; a move higher in April was attributed to investors chasing arbitrage profits, causing inflows from the mainland to relatively undervalued Hong Kong stocks.”