How to Trade on the Hong Kong Stock Market: What to Know

 

Did you know that the Hong Kong stock exchange is the largest Asian Stock exchange? There are over 2,500 companies that make up the exchange.

Do you want to trade stocks on the  Hong Kong stock market? It’s a great way to diversify your investments and it’s easier than you might think.

The following guide will break down how to start trading on Hong Kong’s exchange. Read on to learn about this simple and smart investment opportunity.

Hong Kong Stock Market and ETFs

ETFs offer a simple way for U.S. investors to enter Hong Kong’s exchange. Exchange-traded funds help diversify trading while minimizing currency risk.

Two of the most popular ETFs are iShares MSCI ETF and First Trust Hong Kong AlphaDEX. MSCI mostly involves large and mid-cap financial and real estate companies.

The AlphaDEX Fund tracks Hong Kong stock markets by pairing them with an equity index. You can discover more about Hong Kong ETFs and decide if the safe investment method is right for you.

American Depository Receipts

U.S. investors can choose Hong Kong stocks listed as American depository receipts. ADRs are found on common exchanges like the New York Stock Exchange, Nasdaq, and over-the-counter exchanges.

ADRs are a simple way to buy foreign stocks because they’re traded on American exchanges. You can buy them through a brokerage account just like common shares. However, there is a limited choice of ADRs.

Invest Through a Broker

Brokerage firms that specialize in international access typically include Hong Kong’s market. Always make sure to carefully research and compare brokers before investing with them.

Identify if the account type is discretionary or non-discretionary.  Determine which regions and countries are covered and the commission structure.

The broker must have SEC registration and a Securities Investor Protection Corporation membership.  They must also be members of the Financial Industry Regulatory Authority.

Invest Through a Hong Kong Broker

You can also invest online directly through Hong Kong-based stockbrokers. Although, residents of certain countries have different restrictions. For example, U.S. citizens can only invest with institutions registered through the SEC.

Hong Kong brokers sometimes avoid U.S. investors because of the Foreign Account Tax Compliance Act. Keep in mind that other countries might not have the same problems.

Hong Kong Investment Benefits

International portfolios help reduce investment risks. For example, gains from international holdings can balance losses from American holdings. Some investors evenly split their portfolios between domestic and foreign holdings.

It’s also a great way to diversify currency exposure. Stocks listed on the Hong Kong exchange usually move with Hong Kong’s currency. So, Hong Kong investments balance currency fluctuation if the U.S. dollar falls.

International portfolios let investors take advantage of different market cycles. Investors can look to emerging markets and companies in Hong Kong if they think U.S. stocks are currently overvalued.

Are You Ready to Trade?

Now you know multiple ways to trade on the Hong Kong Stock Market. Consider starting slow with Hong Kong ETFs and advance from there.

We hope you’ve found this Hong Kong investment guide helpful. Check out the rest of our blog for more great financial information and news.