When it comes to capital markets, the New York Stock Exchange and the NASDAQ are probably two of the first names that come to mind. However, there is another key player in Asia Pacific: The Hong Kong Stock Exchange. This article takes a closer look at the Hong Kong stock exchange and explains what it does, its advantages for companies, how you can invest in it yourself, and its history.
What is the Hong Kong Stock Exchange?
The Hong Kong Stock Exchange (HKSE) is Asia’s largest stock exchange, and one of the most important in the world. The HKSE is the third-largest bourse on the globe. The HKSE is also home to the most important index in Asia, the Hang Seng Index (a.k.a. HSI Index). The HSI is a broad measure of the performance of all the companies listed on the HKSE. This makes the HSI one of the most important market indices when it comes to analyzing the Asian stock market as a whole.
HK stock exchange advantages
The Hong Kong Stock Exchange has several advantages for both companies and investors. Let’s look at each in turn. First, the HKSE has a well-established track record and a solid reputation. This has allowed it to grow steadily and consistently since its inception in 1890, and it is currently Asia’s largest stock exchange by market capitalization. The HKSE is also one of the world’s most diversified exchanges, listing around 1000 securities representing 27 industries and 31 sectors. This gives investors a wide range of options when choosing stocks. Secondly, the HKSE is an open market. This means that there are no restrictions on who can list on the exchange and what kind of companies can be listed. This openness means that the exchange welcomes both large and small companies from all over the world. This in turn greatly expands the diversity of companies that can be listed on the exchange. Finally, the HKSE is one of the most open and transparent exchanges in the world. This is particularly important in light of recent events like the Chinese government’s attempted crackdown on capital flight and the US government’s trade dispute with China.
How to invest in HK stocks?
The process for investing in HK stocks is almost identical to that of investing in US stocks. The only difference will be in how you transfer money to your broker since the US and Hong Kong have different currencies. However, you can buy stocks on the Hong Kong Stock Exchange (HKSE) the same way you would buy stocks on the New York Stock Exchange (NYSE). You can start by choosing a stock broker. Your best bet will be a reputable online broker. Next, you’ll need to create an account with your broker. There are some basic steps that you’ll have to go through. You’ll also have to fund your account with some money, but some brokers will let you trade with a minimal amount.
HK stock exchange history
The history of the HKSE goes back to 1890. That year, the “Hong Kong Government Stock Exchange” was formed by a group of brokers. The exchange was then merged into the “Hang Seng Stock Company” in 1911. The exchange was finally renamed to the “Hong Kong Stock Exchange” in 1935.
HKEX market mechanics
The HKSE currently uses the “electronic trading system” (ETS) that was introduced in 2003. This computerized trading system has become the norm for exchanges around the world. That said, the HKSE uses an open outcry market for small orders. This means that orders can be manually entered and matched by brokers. This is important, as it allows the exchange to accommodate small orders that might get overlooked by the ETS.
HKEX risk warning
Finally, even with all the advantages of the HKSE, investing in stocks always comes with some risk. To minimize this risk, you should always follow these steps.
- Research your investment
- Before you buy any stocks, you should thoroughly research each company to make sure it’s a good investment.
- Buy for the long-term
- You should think about investing for the long term. That way, you can ride out short-term fluctuations in the market.
- Diversify your investments
- Finally, you should diversify your investments as much as possible. That way, you’ll minimize any risk from bad investments.
- Risk is part of investing
- And no matter how careful you are, there will always be some risk.
The Hong Kong Stock Exchange is a capital market that lists shares of companies based in Hong Kong and mainland China. The exchange is Asia’s largest stock exchange by market capitalization and the third largest globally. The exchange is owned and operated by Hong Kong Exchanges and Clearing, which also operates the Shanghai, NASDAQ, and Taiwan stock exchanges. The exchange primarily lists companies in Hong Kong, China, and Southeast Asia.