Beginner's Guide to Invest in Stocks Like a Pro [2025 Guide]🧭
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Hong Kong has firmly established itself as a global financial centre, with the Hong Kong Stock Exchange (HKEX) playing a pivotal role in its economic success. As of March 2024, HKEX ranked as the eight-largest stock exchange globally and the fifth-largest in Asia by market capitalization. This status underscores its importance as a hub for investors seeking access to some of the world's most significant companies.
The exchange's strategic position, coupled with initiatives like the Shanghai-Hong Kong Stock Connect, enables seamless trading between mainland China and international markets. This connectivity has made HKEX a crucial bridge for investors looking to diversify their portfolios beyond domestic markets.
For those eager to invest in the Hong Kong stock market, it's essential to understand the various pathways and options available. Here’s a comprehensive guide to help you navigate the process like a seasoned investor in 2024.
Understanding the Hong Kong Stock Market
For new investors, gaining a solid understanding of the Hong Kong Stock Market is crucial before starting an investment. The Hong Kong Exchange (HKEX) is a major global financial hub with a distinct structure that includes the Main Board and the Growth Enterprise Market (GEM).
Each segment caters to different types of companies and investment opportunities, from large and established firms to emerging startups.
How Does HKEX Work?
The Hong Kong Exchanges and Clearing Limited (HKEX) operates as one of the world's largest and most important financial markets, encompassing both the Hong Kong Stock Exchange and the Hong Kong Futures Exchange.
With its Main Board listing 2,300 established companies and the Growth Enterprise Market (GEM) hosting over 320 smaller, high-growth firms, HKEX serves as a critical hub for capital markets in Asia. HKEX facilitates trading in a variety of securities, including stocks, bonds, ETFs, and derivatives, all priced in Hong Kong dollars.
The trading hours, which run from 9:30 a.m. to a random closing time between 4:08 p.m. and 4:10 p.m., allow investors ample time to engage with these markets. Additionally, the performance of HKEX is closely monitored through indices such as the Hang Seng Index, which tracks the largest companies on the exchange
The Hong Kong Exchange (HKEX) two main segments: the Main Board and the Growth Enterprise Market (GEM), provide their service to two distinct types of companies and investors:
| Feature | Main Board | Growth Enterprise Market (GEM) |
|---|---|---|
| Target Companies | Large, established companies | Smaller, high-growth companies (startups and emerging businesses) |
| Regulatory Requirements | Strict criteria, including high market capitalisation, profitability, and financial transparency | Less rigorous requirements, focusing on innovation and growth potential |
| Risk Level | Generally lower due to the established nature of companies. | Higher risk due to the speculative nature and smaller size of companies. |
| Investor Type | Suitable for conservative and institutional investors. | Suitable for risk-tolerant investors looking for high growth opportunities. |
| Investor Opportunities | Investing in large, stable firms with consistent performance | Opportunities to invest in new, high-growth ventures with potential for significant returns |
| Market Liquidity | Higher liquidity, with more trading volume and stability. | Lower liquidity, which can lead to higher volatility and price fluctuations. |
| Disclosure Requirements | Extensive and regular financial reporting and disclosures. | Less frequent reporting and lighter disclosure requirements. |
| Price Volatility | Typically lower due to the larger market cap and established business models. | Typically higher due to the smaller market cap and growth-focused business models. |
| Access to IPOs | Easier access to larger and well-known IPOs. | Easier access to smaller, potentially high-growth IPOs. |
| Dividends | More likely to offer consistent dividends. | Less likely to offer dividends as companies reinvest profits for growth. |
| Investment Horizon | Suitable for long-term, stable investments. | Suitable for shorter-term, high-risk investments with potential for significant growth. |
Listing Requirements
For companies to be listed on HKEX, they must provide three years of financial records and meet one of the following criteria: a market capitalisation of over HK$500 million with specific profit thresholds, a market capitalisation of more than HK$4 billion with at least HK$500 million in recent annual revenue, or a market capitalisation above HK$2 billion with positive cash flow and similar revenue figures.
The reason for companies to provide these requirements is to ensure they will be financially stable, thus able to maintain a stable and trustworthy investment environment.
Hong Kong Market Highlights
| Main Board | GEM | |
|---|---|---|
| No. of listed companies | 2,300 | 322 |
| No. of listed H shares | 332 | 16 |
| No. of listed Non-H share Mainland enterprises | 1,058 | 59 |
| Total no. of listed securities | 13,289 | 322 |
| Total market capitalisation (Bil. dollars) | HKD 31,190 | HKD 45 |
| Average P/E ratio (Times) | 10.90 | 20.60 |
| Total turnover (Mil. shares) | 195,307 | 141 |
| Total turnover (Mil. dollars) | HKD 78,773 | HKD 26 |
* as of 23/8/2024
Where to Buy Hong Kong Stocks: Bank or Brokerage?
| Comparison between banks and brokerages | Bank | Brokerage |
|---|---|---|
| Fees | Higher | Lower |
| Suitable for | Long-term investors | Short-term investors |
Regardless of whether you choose to buy Hong Kong stocks through a bank or a brokerage, your investment will be protected by the Hong Kong Securities and Futures Commission (SFC). The SFC has established the Investor Compensation Company Limited, which allows you to claim compensation from the compensation fund in the event of a bank or brokerage failure, with a compensation limit of up to HK$500,000.
Overview of Fees for Buying and Selling Hong Kong Stocks Across Major Brokerages
When buying and selling Hong Kong stocks, understanding the fees charged by major brokerages is crucial. These fees can include commissions, handling charges, and government levies, which vary across different brokerages. Being aware of these costs helps investors choose the most cost-effective option for their trading needs.
The table in this section provides a comparison of fees charged by major brokerages for trading Hong Kong stocks：
| Brokerage | Trading Commission From | Margin Interest Rate From |
|---|---|---|
| Futu Securities | HK$0 | 6.8% |
| Bright Smart Securities | HK$30 | 6.8% |
| uSmart | HK$0 | 6.6% |
| Webull | HK$0 | N/A |
| SoFi Hong Kong | HK$0 | N/A |
| Tiger Brokers | HK$0 | 6.5% |
Overview of Fees for Buying and Selling Hong Kong Stocks Across Major Banks
Investing in Hong Kong stocks involves various fees, which can vary depending on the bank or brokerage you use. Understanding these fees is essential for maximising your investment returns. Typically, fees for buying and selling stocks include commission fees, which are usually a percentage of the trade value, and minimum charges that apply if the transaction amount is low. In addition, investors may face other costs, such as stamp duty, settlement fees, and handling fees. Each of these charges can impact your overall investment performance, making it important to consider them when planning your trades.
To help investors understand and a better look at these costs, we have compiled a table outlining the fee structures of major banks in Hong Kong. This table provides a clear comparison of the different charges associated with buying and selling stocks, highlighting both the similarities and differences among various banks.
| Bank | Trading Commission | Custody Fee |
|---|---|---|
| Bank of China | 0.18% - 0.25% (Minimum charge: HK$100) | HK$0-150 per half-year |
| Hang Seng Bank | 0.25% (Minimum charge: HK$100) | HK$15-25 per month (depending on asset level) |
| Standard Chartered Bank | 0.2% (Minimum charge: HK$50) | HK$100 per half-year |
| Citibank | 0.18% - 0.25% (Minimum charge: HK$100) | HK$100 per half-year |
| Bank of East Asia | 0.25% (Minimum charge: HK$80) | HK$150 per half-year |
Benefits of Investing in Hong Kong Stocks
Inflow of Mainland Capital Fuels Market Growth
Since the launch of the Stock Connect, a significant amount of capital from Mainland China has been continuously flowing into the Hong Kong stock market. Last year, southbound funds helped the Hang Seng Index stabilise above 27,000 points by the end of the year. This year, the continued influx of Mainland capital drove the Hang Seng Index to surpass the 30,000 mark early in the year. Many analysts believe that Hong Kong’s financial market will continue to benefit from the national policy of “northbound capital moving south,” providing further momentum for growth.
Many High-Quality Chinese Companies Listed in Hong Kong
Numerous high-quality Chinese companies, including Tencent Holdings, Alibaba, Xiaomi, and Meituan, have chosen to list in Hong Kong. Therefore, for investors looking to invest in China’s core assets, Hong Kong stocks are the top choice.
Hot IPO Market in Hong Kong
The IPO market in Hong Kong is thriving, with many high-quality companies planning to list in Hong Kong this year. This makes the Hong Kong IPO market a noteworthy area for investors to watch.
Drawbacks of Investing in Hong Kong Stocks
Higher Entry Threshold Compared to U.S. Stocks
Unlike U.S. stocks, where you can buy a single share, Hong Kong stocks require purchasing a lot (a set number of shares), making the entry cost higher. For example, if the stock price of HKEX (0388.HK) is HK$450.40, buying one lot (100 shares) would cost HK$45,040, which is a higher threshold than buying U.S. stocks. However, you can also invest in Hong Kong stocks through monthly stock saving plans, which significantly lowers the investment threshold, making it more suitable for investors with a smaller budget or beginners. For instance, with the Bank of China Monthly Stock Saving Plan, investors can start with as little as HK$500 per month to buy a single share, greatly reducing the entry barrier. You can learn more from the monthly stock saving guide.
Trading Hours May Clash with Work Hours
The Hong Kong stock market operates from Monday to Friday during the daytime, which overlaps with the typical 9-to-5 work schedule, making it difficult for many people to closely monitor the market during trading hours, potentially missing investment opportunities. Some investors might prefer U.S. stocks as they can trade after work hours, although U.S. market hours also conflict with sleep schedules. Investors can choose the stock market that aligns with their investment strategy and time availability. Additionally, they can use limit orders to buy or sell stocks at a specified price, reducing the need to constantly monitor market prices.
Investment Risk Still Exists
Investing in stocks carries risks and is not an absolutely safe investment method. Investors with lower risk tolerance might consider low-risk options like fixed deposits.
Hong Kong Stocks vs. U.S. Stocks
| Comparison | Advantages | Disadvantages |
|---|---|---|
| Hong Kong Stocks | The Hong Kong stock market has many Chinese companies, such as Tencent Holdings, Alibaba, etc. | Hong Kong stocks are traded in lots (a set number of shares), not individual shares, making the entry cost higher. |
| U.S. Stocks | You can invest in leading U.S. companies like Apple, Amazon, Microsoft, Facebook, and Google; U.S. stocks are traded in individual shares, so the entry cost is lower. | Investing in U.S. stocks may involve time zone differences for Hong Kong residents, potentially causing missed investment opportunities. |
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Introduction to Types of Hong Kong Stocks
The Hong Kong Stock Exchange offers both the Mainboard and GEM (Growth Enterprise Market) where investors can freely trade stocks. Additionally, the HKEX’s cash market provides a range of financial products beyond stocks, including Exchange-Traded Funds (ETFs) and Real Estate Investment Trusts (REITs). Below is a breakdown of the common financial product terms in the Hong Kong stock market:
Blue-Chip Stocks
Blue-chip stocks are the constituent stocks of the Hang Seng Index. To qualify as a blue-chip stock, a company must have strong financial performance, active trading, and a large market capitalization. Blue-chip stocks are relatively stable and typically do not experience significant price fluctuations in a short period.
Red-Chip Stocks
Red-chip stocks refer to Hong Kong-listed companies that are incorporated outside Mainland China but have the majority of their business operations and assets in Mainland China.
Constituent Stocks
Constituent stocks are the selected stocks used to calculate a stock price index, reflecting the market trend of individual stocks. Only significant stocks can be considered constituent stocks.
H-Share Index Constituents
The Hang Seng China Enterprises Index (H-share Index) mainly tracks the performance of H-shares. It has since included red-chip stocks and private enterprises, with a total of 50 constituent stocks.
A-Shares
A-shares are ordinary shares issued by companies based in Mainland China and are available for purchase and trading in RMB by domestic institutions, organisations, or individual investors.
B-Shares
B-shares are special shares issued by Mainland-registered and listed companies, available for purchase and trading in foreign currencies by investors.
H-Shares (State-Owned Enterprise Shares)
H-shares refer to shares issued by companies incorporated in Mainland China and listed in Hong Kong.
Utility Stocks
Utility stocks refer to companies listed on the stock exchange that provide essential services, such as CLP Holdings (0002), HK Electric Investments (2638), and MTR Corporation (0066). These stocks tend to have stable prices and dividends due to the large scale of the companies and the limited competition in the market.
IPO
Initial Public Offering (IPO) or new stock subscription is a fundraising method where companies issue shares to raise capital for future development. After listing, shares can be freely traded on the stock exchange by institutions, organisations, or individual investors.
ETF
Exchange-Traded Funds (ETFs) are funds that track or replicate a specific index. Popular ETFs include the Tracker Fund of Hong Kong (2800), which tracks the Hang Seng Index.
REITs
Real Estate Investment Trusts (REITs) primarily invest in real estate across various sectors using funds raised from investors, with the earnings distributed as dividends.
Derivative Warrants
Derivative warrants are issued by investment banks and allow investors to invest in the underlying asset indirectly.
Callable Bull/Bear Contracts (CBBCs)
CBBCs are structured products that track the performance of an underlying asset without requiring the full amount to purchase the actual asset. As the name suggests, CBBCs are divided into bull contracts and bear contracts. Bull contracts are for investors who are optimistic about the asset’s future and profit from its rising value, while bear contracts are for those with a pessimistic outlook and profit from its declining value.
Bonds
Bonds are debt securities issued by governments or corporations to raise funds. The issuer promises to repay the principal and interest to investors on a specified date.
The Three Major Hong Kong Stock Indices
Hang Seng Index (HSI)
The Hang Seng Index (HSI) is calculated based on the market capitalization of 50 constituent stocks, making it a crucial indicator of the overall performance of the Hong Kong stock market.
Hang Seng China Enterprises Index (HSCEI)
The Hang Seng China Enterprises Index, often referred to as the HSCEI, primarily tracks the performance of H-shares listed in Hong Kong. Over time, it has also included red-chip stocks and private enterprises, with a total of 50 constituent stocks currently.
Hang Seng China-Affiliated Corporations Index (Red-Chip Index)
The Hang Seng China-Affiliated Corporations Index, commonly known as the Red-Chip Index, focuses on tracking the performance of red-chip stocks listed in Hong Kong.
Decoding Hong Kong Stock Market Terminology
ADR (American Depositary Receipt)
An American Depositary Receipt (ADR) refers to a financial instrument issued in the form of a receipt, representing shares in non-U.S. companies that are listed on U.S. stock exchanges.
Stock Connect
Stock Connect refers to a mechanism where Mainland Chinese investors can entrust Mainland securities companies to trade stocks listed on the Hong Kong Stock Exchange within a specified range.
Transfer of Shares
Transfer of shares involves moving stocks from one brokerage account to another for custodial purposes.
T+2 Settlement
The Hong Kong stock market operates on a T+2 settlement system, meaning that transactions are settled two days after the trade date.
Grey Market (Dark Pool Trading)
The grey market refers to transactions of new shares that take place before they are officially listed and traded on the Hong Kong Stock Exchange.
Hang Seng Index Night Futures
Hang Seng Index Night Futures refer to the trading sessions that occur after the regular trading hours of the Hang Seng Index.
Bull Market
A bull market is characterised by an upward trend in the market, typically indicated when the index or stock prices surpass the 250-day moving average, signalling continued positive momentum.
Bear Market
A bear market is a term used for a significant downturn in the market, generally broken down into three phases, with the final phase, known as Bear Phase Three, being the most severe.
Miracle Day
Miracle Day refers to a day when the stock market plunges sharply after opening but then rebounds significantly before the close.
Ding Hai Effect
The Ding Hai Effect is an urban legend originating from the TV drama "The Greed of Man," where it's said that the stock market tends to crash whenever actor Adam Cheng, who played the character Ding Hai, has a new drama airing.
How to Choose the Right Hong Kong Stocks for Investment?
Given the significant fluctuations in stock prices, whether you are a long-term, medium-term, or short-term investor, it is crucial to do thorough research before entering the market. You can utilise different strategies to select stocks and use technical factors to determine when to buy and sell.
Stock Selection Strategies:
Value Investing:
Value investors focus on selecting stocks that are undervalued. The idea is that the current price is attractive because the investor believes the stock's future price will significantly increase. Typically, if a company's price-to-book ratio (P/B ratio) is below 1, it may indicate that the company is undervalued. Conversely, if the price-to-earnings ratio (P/E ratio) is above 15, value investors may avoid buying the stock.
Growth Investing:
Growth investors usually do not prioritise dividends when selecting stocks. Instead, they invest in companies with earnings growth that exceeds the average level, aiming to profit from selling the stock at a higher price.
Technical Analysis:
Fundamental Analysis:
Investors can evaluate a company's financial condition and valuation by analysing fundamental data such as the P/E ratio, P/B ratio, income statement, balance sheet, cash flow statement, and shareholder returns. External factors such as the economy and overall market sentiment should also be considered.
Technical Analysis:
Investors can also use historical data to predict stock price trends. Techniques include charting to determine the best times to enter and exit the market.
Minimum Trading Unit in Hong Kong Stocks: What is a Lot? How Many Shares Are in a Lot?
In the Hong Kong stock market, the minimum trading unit is one lot, not one share, making the entry threshold higher. For example, if CLP Holdings (0002.HK) is priced at HK$79.15, buying one lot (500 shares) would require a payment of HK$39,575, which is a higher threshold compared to buying U.S. stocks.
Odd Lot Trading: What Happens If You Can’t Sell Odd Lots? Can You Receive Dividends on Odd Lots?
Odd lots refer to shares that are less than one lot. Generally, banks do not offer services for trading odd lots because the process is complex. Changes in the number of shares per lot for certain stocks can lead to investors holding odd lots. However, holding odd lots does not affect the receipt of dividends, as dividends are typically calculated on a per-share basis. Most blue-chip stocks have investors willing to buy odd lots, but the purchase and sale prices may not exactly follow the market price and depend on the trading activity of the particular stock.
Hong Kong Stock Trading Hours
Knowing the trading hours of the Hong Kong Stock Exchange (HKEX) is vital for investors, as it helps investors to decide when they can execute orders, respond to market movements and react to breaking news, especially in the evening, providing more time for analysis and strategic decision-making.
| Trading Session | Time |
|---|---|
| Pre-opening Auction Session | 9:00 - 9:30 am |
| Morning Session | 9:30 am - 12:00 pm |
| Lunch Break | 12:00 - 1:00 pm |
| Afternoon Session | 1:00 - 4:00 pm |
| Closing Auction Trading Session | Starts at 4:00 pm, with random close between 4:08 - 4:10 pm |
Hong Kong Stock Trading Fees
Understanding Hong Kong stock trading fees is essential for investors, as these costs can significantly impact overall returns. Fees such as commissions, stamp duty, and handling charges vary across different brokers and banks, influencing the total cost of trading.
| Fee Type | Collected By | Cost (Percentage of Transaction Amount) |
|---|---|---|
| Stamp Duty | Government | 0.1% |
| Trading Fee | HKEX | 0.0027% |
| Transaction Levy | Securities and Futures Commission | 0.005% |
| Stock Settlement Fee | Hong Kong Securities Clearing Company | 0.002% |
How to Track Hong Kong Stock Market Trends? Three Main Channels for Checking Stock Quotes
Want to stay updated with real-time Hong Kong stock quotes? Here are three quick ways to check the latest stock prices and seize investment opportunities:
- AA StocksOffers Hong Kong stock information including free real-time stock quotes and technical charts.
- Yahoo FinanceProvides free stock quotes and the latest financial news to help you manage your wealth.
- Money18 - Oriental DailyProvides designated real-time stock quotes from the Hong Kong Stock Exchange, allowing you to check real-time stock prices for free.
HKEX: The Gateway Asian Markets
Hong Kong's stock market, centred around the Hong Kong Stock Exchange (HKEX), offers an exceptional opportunity for investors, ranking as the eighth largest globally and fifth in Asia by market capitalization as of 2024. With its strategic location and innovative initiatives like the Shanghai-Hong Kong Stock Connect, HKEX provides a seamless gateway for investors to access both Chinese and global markets. Whether you're interested in established companies listed on the Main Board or high-growth startups on the Growth Enterprise Market (GEM), HKEX caters to a broad range of investment preferences.
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