Even if you’ve been staying in a tent in South America and have stayed completely off the grid for the past few years, you’d know that China has grown to be one of the most formidable economies in the world.
If you’re looking to invest, and get involved in this opportunity you should get started by understanding the essentials about the Hong Kong market. Once you have that pat down, you will ready to get investing in the Chinese stock market before you know it. Chinese equities can add diversity to your portfolio which can improve your chances of achieving higher portfolio returns.
What to know before buying Hong Kong Stocks?
The Hong Kong Stock Exchange is based in Hong Kong, China. It is Asia’s third largest stock exchange behind the Tokyo Stock Exchange and Shanghai Stock Exchange. It is also the sixth largest equity market across the global. The Hong Kong stock exchange is a very liquid market which means there are lots of choices of different equities to buy and sell and lots of different people for you to buy and sell with – there are over 1600 equities listed here, over 730 from the city of Hong Kong itself, over 775 from mainland China, and over 100 from a broad range of foreign locations such as Italy and Cambodia.
How Hong Kong Market Works
The normal trading hours of this market are from 930am to 12 noon, and 1pm to 4pm – with a lunch hour in between. All trading takes place electronically with a pre-open and closing auction at either side of the trading day to set the opening and closing market prices. Trading in this market can be very convenient for you as a Singaporean investor as there is no time difference between you and the Hong Kong market.
Lot Size
A unique characteristic of this market is that each stock has its own individual lot size – minimum order size. When you get a price quote for these stocks from your broker it will come with a specific lot size for that stock so you should keep an eye out for this. It is possible to trade in sizes other than lot sizes – this is called the odd lot market. However, this will be hard to execute as there is less liquidity.
Major Stocks and Sectors
The biggest stocks in the Hong Kong market are PetroChina (an oil and gas company) and Industrial & Commercial Bank of China. The market is dominated by the banking and financial, chemical and energy sectors which have achieved the best rates of growth over the past decade.
Major Indices
The major index in this region is the Hang Seng Index which is market capitalisation based on the largest companies in the Hong Kong stock market. Investors across the globe use this index as an indicator of the overall Hong Kong market performance. The Hang Seng Index includes 48 companies, and these represent approximately 60% of the value of the Hong Kong stock market. There are four dominant sectors to the index – finance, utilities, property and commerce and industry.
Purchasing your equities
You can buy and sell Hong Kong equities by notifying your broker that this is what you want to do – as Singapore brokers it ‘s not hard or complicated to extend coverage across Asia.
What should you look out for?
The Chinese economy is currently under the spotlight. The market has experienced huge growth over the past few years, and investors are not sure what will come next, and this is creating some volatility in the regions financial markets. The key difference for you when investing in Hong Kong equities is the currency. You will be buying and selling equities in Hong Kong dollars. Your broker will convert your Singapore dollars for you, but the rate is constantly changing. Most brokers in Singapore now provide multicurrency accounts. This will help you to monitor the currency changes involved with your Hong Kong equity investments and will give you lower charges when it comes to exchanging your money. Monitor the exchange rate when making your investment decisions as it will affect your investment performance.
Keeping track of your equity portfolio
It is important to keep a close eye on your equity portfolio. By doing this, you are more likely to achieve higher returns on your investments. Spread your investments over a variety of holdings – this is called diversification and will help create a higher return on your portfolio Variety prevents you from putting all of your eggs in one basket and lowers the risks to your money.
