As of January 1st, 2025, the Hang Seng Index (HSI) has a trailing price-to-earnings (P/E) ratio of 10.04 and a forward P/E ratio of 9.74. Widely recognized as the benchmark index for Hong Kong’s equity market, the HSI includes some of China’s leading tech giants, such as Alibaba Group, Tencent, Meituan, and Xiaomi, among its largest constituents.

Earnings growth for index companies has been disappointing. 2023 was a particularly weak year, and although earnings saw a slight recovery in 2024, the improvement has been far from robust. Despite renewed optimism surrounding China’s AI sector, analyst expectations for 2025 remain cautious.

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Hang Seng Index – P/E (TTM & Forward), Earnings-per Share (EPS, TTM & Forward) & CAPE Ratio

* The table presents both trailing and forecasted Earnings Per Share (EPS), with values indexed to a base of 100 as of January 1, 2022. EPS (TTM) reflects the aggregate earnings of the Hang Seng index stocks for the past 12 months and is calculated using the net income of the companies. EPS (Forward) is the forecasted (analyst consensus) earnings per share for the next 12 months and is calculated using the estimated operating profit of the companies.

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Earnings Growth of Hang Seng Index Companies

In 2023, companies within the Hang Seng Index (HSI) experienced a significant decline in corporate profits, primarily due to a combination of global economic challenges and domestic issues in China. The HSI itself dropped by 13.8% during that year. The worldwide economic deceleration led to reduced demand for exports from China, impacting revenues of companies listed on the HSI. Uncertainties surrounding China’s economic policies and growth prospects further exacerbated market declines, leading to diminished investor confidence. Rising geopolitical risks, including strained U.S.-China relations, contributed to market volatility and negatively affected corporate earnings.

In 2024, the HSI showed signs of recovery, ending a four-year losing streak by closing up 3,053 points. The Chinese government’s implementation of stimulus policies revitalized economic activity in both mainland China and Hong Kong. The emergence of China’s AI start-up, DeepSeek, injected optimism into the market, particularly benefiting technology stocks within the HSI.

Despite these positive developments, challenges such as mixed consumer spending and weak factory activity in China suggest that underlying economic issues persist, indicating that the recovery may be fragile.

Hang Seng Index (HSI)

The Hang Seng Index (HSI) is the main stock market index of Hong Kong, tracking the performance of the largest and most liquid companies listed on the Hong Kong Stock Exchange (HKEX). The index is dominated by financial and technology companies. The largest constituents are HSBC Holdings Plc, Alibaba Group, Tencent Holdings, and Meituan Inc.

The index has struggled in recent years due to China’s economic slowdown, regulatory crackdowns, and global geopolitical tensions. 2023 was a difficult year, with the index declining by 13.8% due to weak economic growth in China and lower corporate profits. In 2024, the index rebounded, recovering 3,053 points, driven by government stimulus, improved investor confidence, and strong tech sector performance.

The index includes four types of shares, each representing different categories of companies:

1. HK Ordinary Shares
o These are shares of companies incorporated and headquartered in Hong Kong.
o They represent traditional Hong Kong-based businesses with primary operations in the city or internationally.
o Examples: CK Hutchison Holdings, HSBC Holdings.

2. H Shares
o Shares of companies incorporated in mainland China but listed in Hong Kong.
o These companies are typically state-owned enterprises (SOEs) or large private firms approved by the Chinese government to list abroad.
o H shares are traded in HKD and follow HKEX regulations, but their parent companies operate under Chinese law.
o Example: ICBC (Industrial and Commercial Bank of China), PetroChina.

3. Red Chip Shares
o Shares of companies incorporated outside mainland China (usually in Hong Kong or offshore jurisdictions like Bermuda or the Cayman Islands) but controlled by Chinese state-owned entities or local governments.
o These companies have significant operations in mainland China but are structured differently from H shares.
o Example: China Mobile, Lenovo Group.

4. Other HK-Listed Mainland Companies
o This category includes mainland Chinese companies that do not qualify as H shares or Red Chips but are still listed on HKEX.
o Typically, these are private enterprises (not state-controlled) incorporated outside China but operating mainly in the mainland.
o Example: Alibaba Group (incorporated in the Cayman Islands but based in China).