Hang Seng Index
The main indicator of stock market performance in Hong Kong based on 33 companies. The index is arithmetically calculated and weighted by market capitalisation.

See also CAC 40; FTSE Actuaries All-Share Index; FTSE 100 Index;
   hard currency
A currency which is generally accepted throughout the world and which is unlikely to devalue. Examples are the deutschmark, dollar and Swiss franc.

   head and shoulders top

In technical analysis, a common chart formation in which a share price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines.

The first and third peaks are 'shoulders', while the second peak is the formation's 'head'.

When the price falls from the right shoulder and breaks through the neckline the Head and Shoulders Top formation has been confirmed and it is regarded by technical analysts as a signal to sell the share.



See also technical analysis;
   hedge

A strategy employed in the futures, options and warrants markets to reduce risk.

Traditionally a commodity producer (say, a cocoa grower) would agree to sell his goods at a stated price at a stated time in the future, and the user of the commodity (say, a chocolate manufacturer) would agree to buy them. By agreeing on a price, quantity and delivery date, they introduce certainty into their operations and reduce risk. For the producer, the risk would be that prices drop, and for the processor that they would rise.

The same strategy carries over into the financial markets. Options and warrants can be used to hedge a portfolio position. In the case where shares have been sold, for example, the purchase of equivalent call options (the option to buy shares) means that if the shares rise in price, a corresponding rise in the value of the option will offset the notional loss expected on the underlying shares.



   hedge funds
A fund which is managed 'aggressively' to get maximum rates of returns by using derivatives and swaps, selling short, and using arbitrage techniques. Because of the high risk, investors in hedge funds have traditionally been drawn from the ranks of institutional investors who have well diversified portfolios and can afford to take on the extra risk. The rewards of hedge fund managers are usually heavily geared towards the performance of their funds.

   hedge ratio
The number of futures or options contracts required to hedge/counteract the exposure in the underlying instrument (for example shares, commodities etc).

See also futures; option; hedging;
   hedging

A strategy employed in the futures, options and warrants markets to reduce risk.

Traditionally a commodity producer (say, a cocoa grower) would agree to sell his goods at a stated price at a stated time in the future, and the user of the commodity (say, a chocolate manufacturer) would agree to buy them. By agreeing on a price, quantity and delivery date, they introduce certainty into their operations and reduce risk. For the producer, the risk would be that prices drop, and for the processor that they would rise.

The same strategy carries over into the financial markets. Options and warrants can be used to hedge a portfolio position. In the case where shares have been sold, for example, the purchase of equivalent call options (the option to buy shares) means that if the shares rise in price, a corresponding rise in the value of the option will offset the notional loss expected on the underlying shares.



See also futures;
   hidden values
In the US, assets owned by a company but undervalued on the balance sheet and accordingly not reflected in the share price. Similar to hidden reserves in the UK.

See also assets; balance sheet;
   high-tech shares
The shares of companies participating in high technology fields such as computers, semiconductors and electronics, and research-intensive industries like pharmaceuticals.

See also growth stocks; high-tech shares; growth investing;
   high-yield stocks
Stocks whose dividend payouts are high as a proportion of their share price. This could either be because the sector in which they operate is out of favour in the market (hence depressing their share price), or it could be because the company itself is seen to be in problems. From an investment point of view, high-yielders have a superficial attraction in paying a high rate of income, but investors need to consider why the shares are cheap in relation to the income and whether there is a risk of serious capital loss on the value of the shares which will negate any gain on the income.

   higher rate tax

The highest rate of income tax in the UK which in the 2006-2007 tax year is 40%. The rate is applied to each individual's Taxable Income which is calculated as:

Income - Reliefs - Allowances

The higher rate is only applied to the income above £33,300, as the following table illustrates.

  • £1-£2,150: tax rate is 10% (starting rate)
  • £2,151-£33,300: tax rate is 22% (basic rate)
  • Over £33,300: tax rate is 40% (higher rate)

Note: for dividend income the higher rate is not 40% but 32.5%.



See also income tax;
   holder
  1. A person in possession of a negotiable instrument such as a bill of exchange or promissory note. That person may be the payee or the endorsee.
  2. A person who has made an opening purchase of an option and thus has acquired the rights to them.


See also option;
   hostile takeover

A takeover bid by one company for another, in which the directors of the target company oppose the bid. Their opposition may be temporary - in effect, a negotiating ploy to encourage a better offer from the bidder - and hostile bids can turn 'friendly' after a period of public posturing.

Some countries, and indeed some companies, are more accepting of hostile takeovers than others. American and British companies tend to consider them part of the cut and thrust of public status, whilst Continental European and Asian business consider them very bad form even if they are unable to prevent them.



See also white knight; takeover;