Guide to Analysing Companies

Hang Seng Index
The main index of the Hong Kong stock exchange and
therefore of the local market. 
Hard currency
A currency that people want to possess because they believe it
will hold its value. Hard currencies (like the dollar, the hardest
of all) are those in which people are happy to denominate in-
ternational transactions. Hard currencies are more in demand
than soft currencies, and so they often appreciate in value
against other currencies.
Head and shoulders
A recurring pattern on charts that plot the movement of share
prices over time. A head and shoulders occurs when prices
climb to a temporary peak (the left shoulder) before falling
back; prices then rally again (to form the head) before the
market loses momentum. The last part of the pattern involves
another brief rise (the right hand shoulder) before the market
subsides again. The line denoting the overall trend is drawn
across the neck (from left to right). Chartists like to match the
trend in prices against the volume of shares traded at each stage
of the head and shoulders. Volume generally follows prices up
on the left shoulder before tailing off on the head as buyers lose
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confidence. At this point it is usually time to sell. (See also tech-
nical analysis.)
Hedge
Something that reduces the risk of loss from future price move-
ments. During times of high inflation, property is the tradi-
tional hedge. gold too is a popular hedge, but it has not been a
reliable store of value in recent years. derivatives (futures,
options and the like) provide opportunities for investors and
financial institutions to hedge their risks. For example, banks
can lay off part of the risk of their loans becoming duff by
selling interest contracts in the futures market. A perfect hedge
is one which completely eliminates the risk of future losses but
at the expense of any possible gain.
Hedge fund
An investment fund that takes a contrarian approach to most in-
vestors, often by arbitraging between markets to make a
profit. The term “hedge fund” covers a multitude of strategies,
some of which are more exotic than others. Many hedge funds
have high borrowings to give them leverage in specialised
markets where they hope to exploit inconsistencies in pricing
between various financial instruments; others focus ex-
clusively on opportunities in the derivatives markets. Since
the late 1990s, hedge funds have tried hard to broaden their
appeal by offering alternative strategies to individual investors
as well as institutions. This has not stopped many of them
losing money when markets have gone against them.
High-yield bond
A bond that is independently rated below investment
grade and that pays a higher yield, or rate of interest, to
compensate for its greater risk. Bonds that start off as investment