How to Buy Stocks in Hong Kong

Contributor, Benzinga

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Hong Kong was originally ceded to the British Empire in 1842 by the Chinese Qing Dynasty at the end of the First Opium War, making the city a British crown colony. After the British won the Second Opium War in 1860, the Qing Dynasty also ceded nearby Kowloon. 

Hong Kong was later leased to the British for 99 years in 1898. Hong Kong returned to Chinese rule in 1997 when it became a Special Administrative Region (SAR) of the People’s Republic of China. 

Financial markets in Hong Kong have a long history and began operating with the establishment of the first stock exchange there in the late 1800s. Hong Kong has since become a leading international financial center with an extremely active and liquid securities market. 

The financial sector represents almost 19% of the city’s gross domestic product (GDP). Also, because of the city’s location, strong financial infrastructure and history, it often acts as a gateway for foreign firms looking to access markets in Mainland China.   

Another major advantage of operating in the Hong Kong financial markets is the fact that there are no controls over the movement of capital. You won’t pay local tax on dividend income or capital gains in Hong Kong. 

About the Hong Kong Stock Exchange

The Hong Kong Stock Exchange (SEHK) was established in 1891, and it currently ranks as the world’s 5th largest stock exchange with a market capitalization of $4.4 trillion. In 1999, Hong Kong’s Financial Secretary announced significant reforms to the stock and futures market.

Those reforms included merging the Stock Exchange of Hong Kong Limited (SEHK) with the Hong Kong Futures Exchange (HKFE) and the Hong Kong Securities Clearing Company Limited into a single entity that became the HKEX holding company. The merger of those 3 entities was announced in 1999 and their operations were consolidated in March 2000.  

The SEHK, Shanghai and Shenzhen stock exchanges represent the lion’s share of securities turnover in Asia and have a total market capitalization in excess of $10 trillion. The SEHK’s oldest and main stock market index is the Hang Seng index, which comprises 50 of the largest companies listed on the SEHK. The index was launched in 2001 to provide a broader benchmark that covers roughly 95% of the SEHK’s total market capitalization.  

The Hong Kong dollar (HKD) is the currency used in Hong Kong and is currently ranked 14th by the Bank for International Settlements (BIS) among the most actively traded world currencies by global turnover. The Hong Kong Securities and Futures Commission (HKSFC) is Hong Kong’s primary financial regulator and is responsible for overseeing trading in the local stock, forex and contract for difference (CFD) markets.  

Trading Stocks in Hong Kong

Besides the notable tax advantages of trading stocks in Hong Kong, the locale also provides an important venue for investing in Mainland China stocks. Some of the most recognizable Hong Kong stocks include Baidu (Nasdaq: BIDU), Alibaba (Nasdaq: BABA) and Tencent (OTCBB: TCEHY).

The highest concentration of equity in Hong Kong stocks is in the financial sector’s 539 stocks with a market capitalization of over $2.3 trillion. The financial sector is followed by technology services, retail trade, health technology and consumer and nonconsumer durables. 

Since ending its open outcry trading method in 2017, all trading on the exchange is done electronically via the exchange’s Automatic Order Matching and Execution System (AMS). The AMS was upgraded in 2000 and the system can be used to trade warrants, commodities, currency pairs and fixed-income products. 

If you’re based outside of Hong Kong, many of the stocks of the largest and best capitalized Hong Kong companies listed on the SEHK can be traded on major U.S. stock exchanges through American depository receipts (ADRs). 

Regardless of where you trade from, you can open an international brokerage account that gives you access to trade Hong Kong stocks directly on the SEHK or through ADRs on U.S. exchanges.

To begin buying Hong Kong stocks you’ll need to take the following steps:

How to Buy Stocks in Hong Kong

  1. Open a Trading Account

    To trade in any financial market, you need to open a trading account with a reputable broker, whether you’re based in Hong Kong or elsewhere. You can open a local brokerage account with a Hong Kong-based broker as a foreigner, however, keep in mind that restrictions might exist for citizens of certain countries like the U.S.

    Stock brokers based outside of the U.S. must be registered with the U.S. Securities Exchange Commission (SEC) and comply with the Foreign Account Tax Compliance Act (FATCA) in order to accept U.S. clients. This is one reason that many local Hong Kong brokers refuse to take on U.S.-based clients.

    While considerable hurdles can exist for foreigners opening an account with a local Hong Kong broker, the commission savings can be substantial. For example, Fidelity Investments charges $250 HKD ($32) per trade on the SEHK, while a local broker based in Hong Kong would only charge $8 HKD ($1) per trade.

    If you decide to open an account with an international online broker, you may be able to trade select Hong Kong stocks using ADRs listed on U.S. exchanges free of commission. For example, brokers such as Robinhood and E*TRADE offers commission-free trading in stocks and ADRs traded on U.S. exchanges, which would include ADRs on some Hong Kong stocks.

  2. Fund a Trading Account.

    If you’re based in Hong Kong, you probably have a Hong Kong bank account from which you can transfer funds to a brokerage account. For traders based outside of Hong Kong, many brokers will let you open an account without a minimum deposit, although once you decide to buy stocks, you’ll have to deposit the appropriate amount in the account.

    Some brokers — especially those based outside of the U.S. —  routinely ask for a minimum deposit to purchase stocks. You’ll also need to provide documents proving your identity and address, and most brokers will screen account holders to determine their level of financial markets experience via a “know your client” (KYC) protocol. 

  3. Get a Trading Platform.

    After completing the steps above, you’ll have a funded stock trading account open with either a stock broker based in Hong Kong or an international broker. If you plan on trading online, you’ll have to obtain access to a trading platform supported by your chosen broker. 

    Some platforms are web-based while others need to be downloaded onto your desktop computer or mobile device. Make sure you know how to use the platform correctly before entering a live trade. 

  4. Buy Hong Kong Stock.

    You can now begin buying Hong Kong stocks. Your choice of broker will determine whether you can do so directly on the SEHK or through ADRs listed on a major U.S. exchange. 

Best Online Brokers for Trading in Hong Kong

For traders based in Hong Kong, a subsidiary of the Hong Kong Shanghai Banking Corp. (HSBC) called HSBC Broking Services Limited provides a complete brokerage service for the SEHK and is fully regulated by the Hong Kong Securities and Exchange Commission (HKSEC). Also, you may be able to access HSBC’s other subsidiaries that include HSBC Broking Forex, HSBC Broking Futures and HSBC Broking Securities. 

Traders based outside of Hong Kong can trade stocks directly on the SEHK through an account with major online brokers like Interactive Brokers or Saxo Bank. With Interactive Brokers, you also have the option of trading ADRs on Hong Kong stocks for a considerably reduced commission charge. 

You can compare several stock brokers that provide access to the Hong Kong stock market using the convenient table Benzinga has compiled shown below.   

get started securely through Interactive Broker’s website
Best For
Global and Active Traders
N/A
1 Minute Review

Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.  

IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.

Best For
  • Access to foreign markets
  • Detailed mobile app that makes trading simple
  • Wide range of available account types and tradable assets
Pros
  • Comprehensive, quick desktop platform
  • Mobile app mirrors full capabilities of desktop version
  • Access to massive range of tradable assets
  • Low margin rates
  • Easy-to-use and enhanced screening options are better than ever
Cons
  • Trading platform may be intimidating for new investors
get started securely through Saxo Bank’s website
Best For
Serious Forex Traders
N/A
1 Minute Review

Saxo Bank lets traders trade on a high-performing platform with access to over 40,000 financial products, plus everything needed to make an informed decision about putting plans into action. At Saxo Bank, you navigate market turns via curated investment themes, expert market commentary, alerts to your phone, charting tools and in-depth webinars.

Best For
  • Serious forex traders
  • Investors seeking a one-stop-shop for standard, crypto and derivative investments
  • Inquisitive learners
Pros
  • Abundant, broad, unparallelled market analysis and insight
  • Investment platforms that outstrip competitors
  • Free trial with accessible demos
  • Unique analytics tools, like Thought Starters, offering exclusive trading approaches
  • Several platforms fit for beginning investors to day traders
Cons
  • Not available to U.S. & Canadian clients
  • Extensive options, platforms and research tips could overwhelm users
get started securely through TD Ameritrade’s website
Best For
Options Trading
N/A
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates

Are Hong Kong Stocks a Good Investment?

After a year of mass protests and an economic downturn sparked by the global coronavirus pandemic, Hong Kong stocks have seen some abrupt setbacks. By the end of 2020, however, mainland investors had bought approximately $86 billion of shares on the SEHK, which was the highest volume seen since trading links with offshore exchanges began in 2016. 

Also, new Hong Kong companies have raised over $51.3 billion in initial and secondary public offerings. This indicates that the recent underperformance of Hong Kong stocks could be ending. 

While the prospects for profitable investing in Hong Kong seem promising, current geopolitical tensions may currently make many large investors wary about committing funds to that region. The current economic environment suggests making cautious investments in sound companies, but only if you have a high tolerance for risk.   

Frequently Asked Questions

Q

What are the best ways to invest in the Hong Kong Stock Exchange?

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What are the best ways to invest in the Hong Kong Stock Exchange?
asked
A
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You can invest in the Hong Kong Stock Exchange through ADRs, mutual funds, ETFs or open an account with a broker.

answered
Q

Can I invest in other Chinese stock markets?

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Can I invest in other Chinese stock markets?
asked
A
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Hong Kong is the only stock market open to foreign investors. The others are open to domestic investors in China.

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