Learn About the Hong Kong Stock Exchange via ETFs

Hong Kong has been considered as the hotbed of capitalism. It has attracted the interest of international investors. The country is known for its free trade agreements and low taxes.

The Hong Kong Stock Exchange (HKSE) is indeed a force to reckon with. It is reportedly the eighth largest stock exchange in the world. Thus, it has attracted foreign investors. Many investors are seeking ways in which they can invest directly or indirectly in this stock exchange.

Here’s a highlight of some of the ways in which investors can consider trading on listed companies in this lucrative Stock Exchange.

One of the ways is through ETFs. ETFs are an easy way for foreign investors to acquire securities in the lucrative Hong Kong-Stock Exchange. The popular ETFs in the stock market of Hong Kong are the:

  • IShares- MSCI Index fund
  • The Alpha-dex fund.

IShares-MSCI Fund

IShares-MSCI fund is mainly traded in the real estate and financial markets. The fund has been present for 20 years. It boasts of a diversification of 44 holdings. Its total asset worth is slightly over 2 billion dollars (as at September 2016)

The Alpha-dex Fund

The Alpha-dex fund, on the other hand, has been present for four years. It has managed assets worth slightly over 8 million dollars. It tracks the stock markets in the stock market of Hong Kong through keeping it up to speed with the respective Index.

Another avenue for investors across the world to invest in the stock market of Hong Kong is through local brokerage firms located in the stock market Hong Kong. They can be accessed online.

The challenge that arises here is that some Hong Kong brokers avoid clients from specific countries due to restrictions imposed on them. But generally, most foreigners can access them.

Open an Account with a Proper Brokerage Firm

Investors that are seeking to have a direct participation in this lucrative stock exchange should consider opening an account with firms that offer brokerage services in their respective countries.

This brokerage firm, on the other hand, should provide the opportunity for conducting international trade so that access is provided to investors to foreign stocks such as that one of Hong Kong. ETFs will offer an indirect way to hold such stocks.

Hong Kong’s Stock Exchange is accessed internationally by brokers that offer access to international exchanges. Thus it is up to you to thoroughly research brokers before embarking on any trade with them.

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Counter-check the type of account to ascertain if it is discretionary or it is non-discretionary. As you embark on your due diligence, structure of commissions should also be given consideration. Of importance are the countries and regions that are covered by the brokerage firm.

If you reside in America, you can benefit from the provision of American Depository Receipts (ADRs). You can select Hong Kong stocks which are listed as American Depository Receipts.

They are hassle-averse and easy way of owning foreign stocks such as the Hong Kong Stocks. They are purchased in a similar way as common shares – through brokerage accounts.

Limited Extraneous Stocks

The only setback that one could experience with such is their limited nature. Their limited nature is as a result of limited extraneous stocks being itemized by way of ADRs. Some renowned Hong Kong ADRs include AIA Group Ltd and Melco Crown Entertainment Limited.

Investing in the Hong Kong has its fair share of benefits and risk. At face value, the country portrays an attractive destination for investment. However, there are also investment risks during its financial crisis. A case that is worth considering is the Asian Financial Crisis of 1997.

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On the contrary, the benefits that one could reap with investing in the stock market Hong Kong include:

  • Its adjacency to Asian Growth: Virtually all of the largest economies globally are moving into the Asian front, thus strategically positioning Hong Kong.
  • Rising Global Ranks: Hong Kong has been ranked highly in terms of global economy.

The risks associated with investing in the stock market of Hong Kong can be highlighted as:

  • Geopolitical Risks. The proximity of Hong Kong to China poses a risk of geopolitical nature, due to the fact that many leaders in the business sphere originate from the country.
  • Risk Concentration. The economy of Hong Kong heavily depends on its financial sector, which inevitably puts it at enormous risk during economic declines.

In conclusion, investors ought to take cognizance of the costs, regulatory compliance issues and risks associated with the route they use to participate in the Hong Kong’s stock exchange.