A must-see for Hong Kong stock investment, full of dry goods!

The Hong Kong stock market, as a mature international capital market, attracts the attention of global investors.

Compared with the A-share market, there are significant differences between Hong Kong stocks in terms of trading rules, market style and investor structure.

For investors who plan to participate in Hong Kong stock investment, they need to fully understand its operation logic and potential risks.

01

Exchange rate risk:

The Invisible Earnings Killer

Hong Kong stocks are denominated in Hong Kong dollars and Mainland investors need to exchange Hong Kong dollars for Renminbi to participate in trading.

The Hong Kong dollar is pegged to the US dollar, and the actual return from investing in Hong Kong stocks will be eroded if the exchange rate risk is not hedged during the RMB appreciation cycle. For example, if an investment of HK$100,000 in stocks earns 10%, but RMB appreciates 5% during the same period, the actual return is only 5%.

Hedging Strategies:

• QDII funds: Avoid personal operational risks by automatically exchanging foreign currency through the Fund.

• forward contract (finance): Locking in future exchange rates, suitable for investors with larger amounts of capital.

• diversify: Limit the proportion of Hong Kong stock assets to 30% of total assets to reduce the impact of single market volatility.

02

Transaction costs:

Hidden costs eat into profits

Hong Kong stocks have complex trading fees and generally higher comprehensive costs than A-shares:

Examples:

The total cost for an investor to trade HKD10,000 shares is ≈ HKD13 (stamp duty) + HKD2.7 (levy) + HKD5 (transaction fee) + HKD2 (settlement fee) = HKD22.7 (~0.23%).

Note that if traded frequently, the annualized cost could exceed 101 TP3T, far more than A-shares (about 0.051 TP3T).

Therefore, investors are advised to recommend a single transaction amount of not less than HK$5,000 to reduce the expense ratio percentage and avoid short-term speculation with a holding period of at least 1 month.

03

Trading rules:

The double-edged sword of T+0 and flexible lot sizes

T+0 trading

You can buy and sell multiple times on the same day, but you need to be wary of extreme volatility. Some stocks have risen or fallen more than 50% in a single day, and novices are prone to lose money by chasing the market.

👉 Recommendation: Set a limit on the number of trades in a single day (e.g. ≤ 2) to avoid emotional operations.

Number of flexible hands

The number of shares per lot varies greatly (e.g. 100 shares/lot for Tencent, 400 shares/lot for some small-cap stocks), and the actual purchase amount needs to be calculated.

👉 Example: A stock is trading at HK$10, with 400 shares per board lot and a minimum buy-in amount of HK$4,000 (excluding fees).

no limit on daily price variation

Individual stocks fluctuate violently, need to set a stop-loss line (e.g., a single day loss of more than 5% will be sold).

black market trading

The IPO can be traded from 16:15-18:30 on the day before listing, which is an important window to observe market sentiment. If the dark market breaks more than 10%, it is recommended to apply for the purchase with caution.

04

Newbie Survival Strategies:

Starting with a solid marker

Prioritize Blue Chips & ETFs

👉 Blue chips: e.g. Tencent (00700.HK), HKEx (00388.HK), high liquidity and stable performance.

👉 ETFs: Hang Seng ETF (2800.HK), Hang Seng Technology ETF (3032.HK) to diversify risk and follow the index.

Avoid high-risk targets

👉 Penny stocks: share price below HK$0.1, low turnover, easy to fall into manipulation tools.

👉 Older stocks: frequent share consolidation and rights issues, low shareholding of major shareholders (e.g. Hanergy Thin Film).

position management

👉 Hong Kong Stock Connect funds are recommended to account for ≤30%, with a single individual stock position of ≤15%.

👉 Maintain a 20% cash position for covering positions during extreme market volatility.

Hong Kong stock investment provides investors with the opportunity to participate in the international market. Opportunities and challenges co-exist, and only with an in-depth understanding of the rules can you navigate through them.

Hopfen Group accompanies you, provides you with professional financial knowledge and services, and makes investment more warm. Welcome to contact us!