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With current social and political unrest affecting Hong Kong markets, diversifying your portfolio by buying foreign stocks makes a lot of sense if you’re based in Hong Kong. Despite many world stock markets underperforming, the U.S. stock market continues surging to record highs, which could make trading and investing in U.S.-based assets a good bet.
Overview: Trading US Stocks in Hong Kong
Living in one of the world’s major financial centers means Hong Kong-based traders and investors can choose from a number of ways to trade U.S. stocks. Before you decide to fund a trading account, you should have an idea of what stocks you want to trade and the type of strategy you expect to use.
If you have no experience with trading stocks, then you can begin by opening a free practice or demo account with an online stock broker. Ideally, the broker you select will provide educational resources for new traders so you can learn about the risks involved and the different strategies you can use when trading.
Even if you have experience trading stocks, you should still open practice accounts whenever possible. Trading in a demo account is a great way to learn and assess brokers’ platforms and test out your strategies before risking your money. One of the keys to successful trading is having a profitable trading plan that you can stick to.
The more you know about trading and your emotional responses to making and losing money, the higher the likelihood of your success. Even if you trade through the best stockbrokers in Hong Kong, your success in the market is not guaranteed — it often depends on your preparation. Remember, knowing how to trade is just as important as choosing the right broker.
Method 1: Trade US Stocks Through Your Bank
The easiest way for Hong Kong residents to trade U.S. stocks is by opening an investment account with their bank. This can be done in person at your current bank or by opening an account at another bank.
If you already have a bank account at Hong Kong Shanghai Banking Corporation (HSBC), for example, you can open an investment account with HSBC Broking Services Asia. HSBC requires several documents to open an account, including a completed U.S. Internal Revenue Service (IRS) W-8BEN tax form. This form is generally required if you’re a non-U.S. person who has a beneficial ownership in an amount ordinarily subject to U.S. withholding tax, such as dividends or capital gains on stocks. It allows you to request a reduction to or an exemption from paying U.S. taxes based on tax treaties with your country of residence, such as Hong Kong.
Using this trading method is often easier because the bank already has direct access to your funds through your bank accounts. You can also trade Hong Kong and Chinese Class A shares through the same account and trading channels.
Commissions on trading U.S. stocks at HSBC Broking Services begin at $18 per trade and increase depending on the volume of shares traded. Other miscellaneous service charges may apply to transactions.
Another major Hong Kong bank that allows you to trade U.S. stocks is Hang Seng Bank. One of the bank’s featured products is the Hang Seng U.S. Securities Trading Service offered to its Prestige Signature customers. You are required to have a minimum balance of HK$500,000 to open such an account, and monthly charges apply if your balance drops below that amount. Accounts with more than HK$1,000,000 have additional benefits. The Hong Kong dollar currently trades at 7.82 to 1 U.S. dollar.
In addition to filing a current U.S. IRS W-8BEN Form, you must activate a U.S. dollar overseas security sub-account. This allows you to enter orders through their manned U.S. Securities Trading Hotline. That hotline also reports current market quotes and order status and allows you to make order cancellations and amendments. Commissions for U.S. stocks traded on the Hong Kong Stock Exchange (SEHK) cost a minimum of HK$100.
Orders for trades made on U.S. exchanges cost $0.025 per share plus 0.55% of the transaction amount with a minimum of $38, plus a Securities and Exchange Commission fee of 0.00207% of the total transaction amount. If you have an account with another large Hong Kong bank, you might want to check if they have investment accounts and whether you can trade U.S. stocks if you open this type of account.
Compared to other trading options — and despite the extra convenience in making fund transfers — if you plan to trade U.S. stocks actively from Hong Kong, your added costs of doing so through a Hong Kong bank could significantly cut into your profits.
Method 2: Open an Account with an International Broker
This method for trading U.S. stocks typically makes the most sense for traders and investors based outside of the U.S. The best international brokers allow their clients access to multiple markets, including U.S. stock trading.
Not only can you trade in multiple markets with most international brokers, but they also allow you to open accounts in multiple currencies. This gives you a chance to make (or lose) money on the exchange rate of your investments. Among the various international brokers that accept clients from Hong Kong, Interactive Brokers offers the lowest commissions, the widest range of tradable assets and access to many exchanges around the world.
Besides trading U.S. shares, you can buy and sell local SEHK shares, equities, commodities, exchange-traded funds, futures, options, bonds and a slew of derivatives on more than 125 world markets through an Interactive Brokers account. Besides the U.S. and Hong Kong, Interactive Brokers has offices in Australia, Canada, Switzerland, the UK, Hungary, Russia, Japan, India, China and Estonia.
Interactive Brokers has oversight from most of the world’s major financial regulators, including the Securities and Futures Commission (SFC) of Hong Kong. Commissions for U.S. stock trades are $0.005 per share with a minimum of $1 per trade and a maximum charge of 1% of the trade value of the transaction. Options trade commissions are $0.70 per contract.
Other international brokers that accept clients from Hong Kong and give you access to trade U.S. stocks include Saxo Bank, Charles Schwab and TradeStation. Trading through an international broker probably has the lowest commissions, although be aware that the minimum deposit for opening an account with Interactive Brokers is $10,000, while it is $25,000 for Schwab’s international account. Also, Interactive Brokers charges an inactivity fee for idle accounts.
Method 3: Use a Hong Kong Stock Broker
Many local stock brokers in Hong Kong allow you to trade U.S. stocks either through depository receipts traded on the SEHK or executed and cleared directly on U.S. exchanges. Commissions do vary considerably among local Hong Kong stock brokers for executing U.S. stock trades. Most local brokers charge around HK$100 per stock trade for transactions.
Even though you can trade U.S. stocks through many local brokers in Hong Kong, some brokers may not let you trade these stocks via their online platform. You instead have to phone in your order to their trading desk, which seems rather antiquated.
The stock brokers listed below are all based in Hong Kong and allow you to trade U.S. stocks on their online platform:
- Boom Securities: A division of the Japanese Monex Group, Boom offers access to a wide range of Asian securities, as well as trading in U.S. stocks including stocks listed on the over-the-counter bulletin board pink sheets (OTCBB). U.S. stock trading generally costs $0.01 per share with a $20 minimum per trade.
- DBS Vickers Securities: This stock brokerage arm of the Singapore-based DBS Vickers Bank provides a full range of online brokerage services that include the ability to trade U.S. stocks. Global and American Depository Receipts for U.S. stocks traded in Hong Kong and Singapore are available at the normal SEHK commission rates.
- Phillip Securities: Singapore-based Phillip Securities accepts clients from Hong Kong and provides access to trade many U.S. stock-based ETFs, as well as major U.S. stocks such as Apple Inc. (NASDAQ: AAPL), Alphabet Inc. Class A shares (NYSE: GOOG) and Visa Inc. (NYSE: V).
- Haitong International: Hong Kong-based Haitong International offers wealth management, corporate finance and asset management to clients that include trading in U.S. assets and stocks, as well as those listed on the London, Singapore, Hong Kong, Tokyo, Sidney and Mumbai markets.
Method 4: Open an Account with a US Broker
Opening an account with a broker based in the U.S. is possible for a Hong Kong resident, although many stock brokers shy away from opening accounts for foreign investors. You can still open an account with a U.S. broker if you initiate contact and solicit the broker’s services yourself. You may also have to open a U.S. bank account to fund your account, depending on the stock broker you select.
If you choose to open an account in the U.S., you might also be able to access free stock trading through Robinhood or Webull, for example. To download the commission-free stock trading apps to your phone, you’ll probably need to access a virtual private network (VPN) with a U.S. Internet Protocol (IP) address.
While you might be able to save on commissions with a U.S.-based broker, the savings would probably not compare with those available by selecting Interactive Brokers, unless perhaps you can open an account with a commission-free broker.
The Next Step
The most economic way to trade U.S. stocks from Hong Kong is through depository receipts for U.S. stocks traded on the SEHK or through an international broker such as Interactive Brokers if you can afford its substantial minimum initial deposit.
The easiest way to trade U.S. stocks is through your local bank by opening an investment account at the bank where you already have a checking or savings account. Trading through a Hong Kong broker makes sense if you already have an account open, but you should consider other options if you pay high commissions and intend to trade actively.
Having a good idea of what stocks you want to trade and how you plan to make money is vital. Trading in any market without a clear trading plan could spell disaster, especially for new traders, so make sure you have a strategy before you begin trading stocks in a funded account.
Frequently Asked Questions
How can I can confidence in trading stocks?
There are a few things you can do to boost your confidence trading. Find a mentor who can support and advise you. This could be a friend or acquaintance or even someone you meet through your trading platform.
It’s also important to stay up-to-date with the news. Benzinga Pro makes that easy. Start your free trial now!
Take your time learning new strategies, and don’t be afraid to try a demo account again.
How can I predict the stock market?
Investing in stocks can be challenging since you can’t predict the future of the market. It can change in a matter of minutes!
Some stock investors try to wait for the perfect time to invest. Some even wait out some pretty dismal returns in the hope of a turn around.
Others invest in stocks to see if the yields are low so they can cash out before losing even more. You can spend some time learning about stock valuation, and use the tools at your disposal through your trading platform.
Can I buy stocks through international banks with access to Hong Kong?
You can buy stocks if the bank offers access to Hong Kong’s markets, such as HSBC.
What are the best Hong Kong-based brokerage firms?
There are several, including Phillip Securities, DBS Vickers Securities and Boom Securities.
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