RETAIL INVESTOR SURVEY 2001 · CSU - Research & Policy, HKEx 2 May 2002 - 4 - Retail Investor...

RETAIL INVESTOR SURVEY 2001

Hong Kong Exchanges and Clearing Limited

Research & Policy, Corporate Strategy

2 May 2002

CSU - Research & Policy, HKEx2 May 2002

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Retail Investor Survey 2001

CONTENTS

Page

1. EXECUTIVE SUMMARY 2

2. INTRODUCTION 52.1 Objectives 52.2 Methodology 52.3 Comparability with past surveys 52.4 Glossary 6

3. RETAIL PARTICIPATION 73.1 Types of investors 73.2 Types of stock investors 83.3 Reasons for not investing 9

4. INVESTOR PROFILE 11

5. INVESTMENT BEHAVIOUR 145.1 Investment in securities products 145.2 Stock investment experience 155.3 Number of listed company shares held 155.4 Stock portfolio size 165.5 Investment time frame 175.6 Number of transactions 175.7 Average deal size 185.8 Risk preference 195.9 What would make investors trade more 195.10 Investment behaviour by type of stock investors 20

6. ONLINE TRADERS 216.1 Incidence and proportion of online traders 216.2 Reasons for trading / not trading online 226.3 Investment behaviour of online traders 23

7. THE USE OF INTERMEDIARY SERVICES 247.1 Type of broker used 247.2 Reasons for choosing the broker 257.3 Commission charged by brokers in stock trading 257.4 Investment behaviour of stock investors by type of broker used 267.5 Satisfaction with broker services 27

8. PERCEPTIONS OF THE HONG KONG STOCK MARKET 298.1 Views on the stock market 298.2 Views on Hong Kong listed China stocks 318.3 Interest in trading overseas stocks through HKEx 32


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1. EXECUTIVE SUMMARY

HKEx has conducted the Retail Investor Survey periodically since 1989 (formerly bythe Stock Exchange of Hong Kong). The survey findings provide a comprehensivepicture of trends and characteristics of retail participation in Hong Kong. The RetailInvestor Survey 2001 was conducted in December 2001.

Retail participation

• 20.3% of Hong Kong adults (or 1,089,000 individuals) were stock investors whowere currently holding or had traded HKEx-listed or -traded stocks in the 12months preceding the interview. 5.2% (or 279,000) were derivatives investorswho were currently holding or had traded derivative products (including futures andoptions) on HKEx in the 12 months preceding the interview. 20.6% (or 1,102,000)were retail investors who were either stock investors or derivatives investors.

• 18.6% of stock investors were new stock investors, who had invested in stocks forthe first time within the past 2 years.

• For non-investors, the main reasons for not investing in Hong Kong stocks or inderivative products were no spare money and insufficient knowledge about themarket, listed companies or products.

Investor profile

• A typical Hong Kong retail stock investor is a 42 year-old professional or manager,with upper-secondary or above education and with a monthly personal income ofabout HK$18,750.

• Compared to all stock investors, new stock investors comprise a larger proportionof females, younger persons and persons having lower personal income and lowerworking status.

Investment behaviour

• Compared to the findings in 1997 (the year of the previous survey), the value ofstock holding and the transaction amount were less, the period of stock holding waslonger and trading was less frequent.

n The median stock portfolio size was HK$95,000, down one-third fromHK$150,000 in 1997.

n The median deal size was HK$30,000, substantially lower than HK$50,000 in1997.

n The median duration of stock holding increased to 18 months from 4 months in1997.

n The median number of transactions in the last 12 months dropped to 3 from 10in 1997.


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• Most stock investors consider themselves neither aggressive nor conservative intaking risk for a higher return. Stock-and-derivatives investors were more activetraders and were more aggressive, while new stock investors were less activetraders and were more conservative.

• Among the stimuli for more trading either in frequency or transaction amount, themost favourable ones were more high-quality listed companies in the market (64%)and lower transaction cost (47%).

Online traders

• 18.1% of stock investors were online traders who had traded stocks on HKExthrough electronic media such as the Internet either always or sometimes.

• The main reasons for using online trading included convenience (77%), timelyexecution (21%) and low commission rate (14%). The main reasons for not usingonline trading included lack of knowledge on using computer/Internet/onlinetrading (39%), lack of confidence in online trading/online brokers (25%) andinconvenience of online trading/Internet inaccessible (21%).

• Compared to stock investors, online traders comprise a larger proportion of males,younger persons, persons with higher education level, higher working status andhigher personal income.

• Compared to stock investors, online traders participated in Hong Kong stocktrading for a shorter period of time, and were more active and more aggressive.

Use of intermediary services

• 49% of stock investors traded through banks only, up substantially from 30% in1997. In comparison, a much larger proportion of new stock investors (72%) andonline traders (58%) traded through banks only. The main reason for choosing abank as broker was their sound background — having confidence in their financialbackground and in their good business record.

• Stock investors trading through brokerage firms tended to have longer investmentexperience, being more active in trading and more aggressive than those tradingthrough banks.

• Most stock investors (80%) were satisfied with the services provided by theirbrokers. Stock investors trading through brokerage firms showed highersatisfaction than those trading through banks.


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Perception of the Hong Kong stock market

• Most stock investors agreed that trading in the Hong Kong stock market wasefficient (89%), market information available was good (72%), the Hong Kongstock market was a fair and orderly market (72%), there were sufficient high-quality listed companies available for investment (70%) and regulation of brokerswas effective (69%).

• The majority of stock investors agreed that regulation of listed companies waseffective (64%), listed companies had good disclosure of information (58%),investors were well-protected (57%) and listed companies had good corporategovernance (52%). About half of stock investors agreed that transaction costswere low (50%) and regulation of insider trading was effective (46%).

• Most stock investors agreed that they had more confidence in investing in Chinesecompanies listed in Hong Kong than those listed in the Mainland (83%). 20% ofstock investors agreed that they had confidence in the regulation of Hong Konglisted China stocks.

• About one-quarter (26%) of stock investors showed interest in trading overseasstocks through HKEx. However, 49% were not interested at all.


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2. INTRODUCTION

The Retail Investor Survey is conducted roughly triennially by HKEx (formerly by theStock Exchange of Hong Kong (SEHK), now a wholly-owned subsidiary of HKEx).The survey aims to understand the major trends of retail participation andcharacteristics and opinions of retail investors in the Hong Kong securities market.The Retail Investor Survey 2001 was conducted by a market research company onbehalf of HKEx in December 2001. The last full-scale survey was conducted inSeptember 1997. In the intervening period, omnibus surveys were conductedannually to obtain basic statistics on retail participation.

2.1 Objectives

The objectives of the 2001 survey are:

• To assess the incidence of retail participation in HKEx products and the socio-economic profiles of retail investors;

• To understand the investment behaviour of retail stock investors;

• To assess retail stock investors’ perception of different aspects of the Hong Kongstock market and their satisfaction with the services of intermediaries.

2.2 Methodology

The survey fieldwork was conducted in December 2001. A random sampling processwas adopted to select individuals aged 18 or above. Selected individuals wereinterviewed through telephone in accordance with a structured questionnaire.

The survey was conducted in two stages. The first stage was to find out the incidenceof retail participation in the adult population and their socio-economic characteristics.During this stage, a total of 2,007 individuals were interviewed, of which 413 werestock investors. The second stage was to interview an additional sample of stockinvestors to boost the sample size of stock investors to 800, which could provide morereliable analysis results.

The survey is subject to certain limitations. First, most responses were perceptions orestimates of respondents that might deviate from the truth. Second, respondentsmight intentionally not tell the truth on sensitive questions such as wealth or incomelevel. Third, on prospective issues such as reactions of respondents to certainchanges of conditions, the responses might not be an accurate prediction of how therespondents would actually react to such changes if they were in fact to arise.

2.3 Comparability with past surveys

The last full-scale survey was conducted in September 1997. A bullish market wasexperienced in 1997 while a relatively dull market was experienced in 2001. Thecurrent survey is also the first full-scale survey after the Asian financial crisis in late1997 to 1998. Such changes in market conditions would have an impact on theinvestment behaviour and investors’ perception on the stock market.


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While the past full-scale surveys addressed retail stock investment only, the currentsurvey also ascertained the incidence of retail derivatives investors who invest inHKEx’s derivative products.

In the 2001 survey, the definition of “Hong Kong stocks” includes shares, warrantsand Exchange Traded Funds (ETFs). In the 1997 survey, it referred to shares,warrants and stock options, these being SEHK’s products at that time. Nevertheless,the proportion of stock investors who invested exclusively in stock options but notshares was negligible1. The incidence of retail stock investment should becomparable.

The definition of adults in surveys before 1997 referred to individuals aged 21 orabove. Since 1997, the definition was revised to individuals aged 18 or above.However, a negligible proportion of stock investors was in the age range of 18 to 20 inthe surveys since 1997. The investor group should therefore be comparable acrosssurveys.

2.4 Glossary

Stocks: Securities including shares, warrants and Exchange TradedFunds (ETFs) listed or traded on HKEx.

Derivative products: Futures and options traded on HKEx.

Stockowner: An individual who is currently holding stocks on HKEx atthe time of the interview.

Stock investor: An individual who is currently holding or has tradedstocks on HKEx in the past 12 months preceding theinterview.

Derivatives investor: An individual who is currently holding or has tradedderivative products on HKEx in the past 12 monthspreceding the interview.

Retail investor: An individual who is either a stock investor or aderivatives investor.

New stock investor: A stock investor who has traded stocks on HKEx for thefirst time within the past 2 years.

Online trader: A stock investor who has traded stocks on HKEx throughelectronic media such as the Internet and mobile phone,either always or sometimes.

Non-investor: An individual who is neither a stock investor nor aderivatives investor.

1 Including those who also invested in stocks, less than 1% of adult population were stock options investors in1997.


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3. RETAIL PARTICIPATION

3.1 Types of investors

In December 2001, 20.6% of the Hong Kong adult population (or 1,102,000individuals) were retail investors. 20.3% (or 1,089,000) of the adult population werestock investors and 18.6% (995,000) were stockowners. 5.2% (or 279,000) werederivatives investors. (Table 1)

Table 1. Types of investors

Projected number ofindividuals

Percentage of Hong Kongadult population

('000) (%)

Retail investors 1,102 20.6

Stock investors 1,089 20.3

Stockowners 995 18.6

Derivatives investors 279 5.2

Non-investors 4,255 79.4

Total 5,358 100.0

The proportion of stock investors in 2001, at around 20%, was similar to that in 2000.However, the figure increased significantly from 16% in 1999. (Figure 1)

Figure 1. Trend of stockownership and stock investment

9%

14% 13%

19%19%

9%8%

20%21%

16% 16%

10%9%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1989 1992 1994 1997 Jan 1999 Nov 2000 Dec 2001

Proj

ecte

d nu

mbe

r of s

tock

owne

rs /

stoc

k in

vest

ors

0%

5%

10%

15%

20%

Perc

enta

ge o

f adu

lt po

pula

tion

asst

ocko

wne

rs /

stoc

k in

vest

ors

Projected number of stockowners Projected number of stock investorsPercentage of adult population as stockowners Percentage of adult population as stock investors


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The proportion of derivatives investors in 2001 (5%) increased substantially from1.5% in November 2000. However, the participation rate is still low, compared tostock investment. The introduction of mini-HSI futures in October 2000, for which88% of turnover was contributed by retail investors2, might be one major reason forthe increase. (Figure 2) Nevertheless, due to the small proportion, the statistic wouldbe subject to large error.

Among the derivatives investors, 95% also invested in Hong Kong stocks (referred asstock-and-derivatives investors) and the remaining 5% invested exclusively inderivatives (referred as derivatives-only investors).

Figure 2. Trend of derivatives investment

79,000

279,0001.5%

5.2%

0

100,000

200,000

300,000

400,000

Nov 2000 Dec 2001

Proj

ecte

d nu

mbe

r of

der

ivat

ives

inve

stor

s

0%

1%

2%

3%

4%

5%

6%

Perc

enta

ge o

f ad

ult p

opul

atio

n as

der

ivat

ives

inve

stor

s

Projected number of derivatives investors Percentage of adult population as derivatives investors

3.2 Types of stock investors

Among the stock investors, 24% also invested in derivatives (stock-and-derivativesinvestors) and the remaining 76% invested exclusively in stocks (stock-only investors).New stock investors accounted for 19% of all stock investors. Compared to 32% in1997 and 30% in 1994, the percentage of new stock investors dropped substantially.18% of stock investors were online traders. The figure increased remarkably fromthe 7% in 20003. (Table 2)

2 For the period from July 2000 to June 2001, source: HKEx Derivatives Market Transaction Survey 2000/01.

3 In the 2000 Omnibus Survey, only participation in Internet trading (orders placed via the Internet) wasaccessed. Since the Internet is the major order placing channel, the figure should be comparable with thelatest survey finding, which includes other electronic order-placing media.


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Table 2. Types of stock investors

Projected numberof individuals

Percentage ofstock investors

('000) (%)

Stock investors 1,089 100.0

Stock-only investors 823 75.6

Stock-and-derivatives investors 266 24.4

New stock investors 202 18.6

Online traders 197 18.1

Over half of the new stock investors entered the Hong Kong stock market throughsubscribing shares of large-scale initial public offerings, such as MTR (53%). Otheroccasions include buying Tracker Fund (10%) and buying GEM stocks (5%).(Figure 3)

Figure 3. Occasions for entering the Hong Kong stock market

53%

10%

5%

3%

10%

7%

3%

3%

2%

2%

1%

0% 10% 20% 30% 40% 50% 60%

Subscribing shares of large scale initial public offerings, e.g. MTR *

Buying Tracker Fund *

Buying GEM stocks *

Acquiring employee stock option scheme/stock bonus from employers *

Influenced by friends / relatives

Had spare money for investment

Interest rate was low

Stock market was active

Stock price was low

Influenced by the media

Influenced by bank staff

Percentage of stock investors

* Read out to respondents while others were given by respondents.

3.3 Reasons for not investing

Similar to the findings in 1997, the main reasons for not investing in Hong Kongstocks were no spare money (59%) and insufficient knowledge about the stock market,listed companies or products (39%). (Figure 4)


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For derivative products, the main reasons for not investing were also no spare money(49%) and insufficient knowledge about the derivative market or products (45%).(Figure 5)

Figure 4. Reasons for not investing in stocks

59%

39%

13%

11%

6%

2%

2%

1%

1%

3%

0% 10% 20% 30% 40% 50% 60% 70%

No spare money

Insufficient knowledge about the stock market/listed companies/products

Stock investment too risky

No confidence in the stock market

Too time-consuming/ no spare time

Had unpleasant investment experience

Not interested in making investment

Too much money required

Insufficient market information

Others

Percentage of non-stock investors

Note: Multiple answers were allowed.

Figure 5. Reasons for not investing in derivative products

49%

45%

11%

10%

6%

2%

1%

1%

5%

1%

0% 10% 20% 30% 40% 50% 60%

No spare money

Insufficient knowledge about the derivatives market or products

Derivatives investment too risky

No confidence in the derivatives market

Too time-consuming/ no spare time

Had unpleasant investment experience

Not interested in making investment

Insufficient market information

Others

Refusals / Don't know

Percentage of non-derivatives investors



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4. INVESTOR PROFILE

A typical Hong Kong retail stock investor is a 42 year-old professional or manager,with upper-secondary or above education, and with a monthly personal income ofabout HK$18,750.

The profiles of stock investors over the years showed slight changes. The proportionof female investors slightly decreased to 44% from 48% in 1999 and 2000. Themedian age of stock investors increased to 42 from 40 in 1999 and 37 in 2000. Thepersonal income also observed an increase to HK$18,750 from HK$17,500 in 1999and HK$16,250 in 2000.

Compared to derivatives investors and non-investors, stock investors differ in certaincharacteristics: (Table 3)

• Compared with non-investors — Stock investors comprise a larger proportion ofmales and individuals with higher education level and higher working status.Stock investors also tend to have higher personal income.

• Compared with derivatives investors — Derivatives investors tend to be youngerand have higher personal income.

Compared to stock investors as a whole, new stock investors and online traders alsodiffer in certain characteristics: (Table 4)

• New stock investors — New stock investors comprise a larger proportion offemales, younger persons, persons with lower personal income and lower workingstatus.

• Online traders — Online traders comprise a larger proportion of males, youngerpersons, persons with higher education level, higher working status and higherpersonal income.


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Table 3. Profiles of different types of investors

(%)Adult

populationStock

investorsDerivatives

investorsNon-

investors

Sex

Male 48.1 56.0 58.1 46.1

Female 51.9 44.0 41.9 53.9

Age

18 – 19 3.4 0.5 1.9 4.0

20 – 29 18.5 12.3 18.0 20.2

30 – 39 23.7 32.3 34.9 21.5

40 – 49 22.8 26.8 22.6 21.8

50 – 59 12.9 18.6 15.6 11.4

60 or over 18.7 9.6 7.1 21.1

Median 42 42 37 42

Education level

No schooling / kindergarten 8.4 0.7 0.4 10.4

Primary 20.3 11.8 9.5 22.4

Lower secondary 18.1 16.0 15.8 18.7

Upper secondary 28.1 30.4 31.9 27.5

Matriculation 6.4 9.0 7.1 5.7

Tertiary or above 18.4 31.8 35.3 14.9

Refusals 0.3 0.2 - 0.3

Occupation

Managers / administrators / Professional 10.9 24.5 28.3 7.2

White collar 17.9 23.4 25.0 16.5

Blue collar 25.1 22.8 26.1 25.7

Homemakers 19.1 13.6 12.4 20.6

Retirees 13.9 10.1 5.8 14.9

Students 4.0 0.6 1.0 4.8

Unemployed persons 7.7 3.5 1.5 8.8

Others 0.3 0.1 - 0.3

Refusals 1.0 1.3 - 1.0

Median monthly personal income (HK$) * 11,250 18,750 22,500 11,250

Median monthly household income (HK$) 16,250 27,500 35,000 13,750

* Among those who were engaged in full-time or part-time employment.


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Table 4. Profile of different types of stock investors

(%)Stock

investorsNew stock

investorsOnlinetraders

Sex

Male 56.0 44.1 72.2

Female 44.0 55.9 27.8

Age

18 – 19 0.5 2.6 1.3

20 – 29 12.3 24.2 23.1

30 – 39 32.3 36.3 35.9

40 – 49 26.8 20.0 26.4

50 – 59 18.6 13.7 11.2

60 or over 9.6 3.2 2.1

Median 42 37 37

Education level

No schooling / kindergarten 0.7 - -

Primary 11.8 10.9 3.0

Lower secondary 16.0 17.3 8.2

Upper secondary 30.4 31.2 24.9

Matriculation 9.0 7.5 6.5

Tertiary or above 31.8 32.6 57.4

Refusals 0.2 0.6 -

Occupation

Managers / administrators / Professional 24.5 14.9 38.9

White collar 23.4 24.5 29.3

Blue collar 22.8 29.4 21.6

Homemakers 13.6 14.9 4.9

Retirees 10.1 5.9 3.2

Students 0.6 2.1 -

Unemployed persons 3.5 5.8 2.1

Others 0.1 - -

Refusals 1.3 2.4 -

Median monthly personal income (HK$) * 18,750 16,250 27,500

Median monthly household income (HK$) 27,500 27,500 35,000

* Among those who were engaged in full-time or part-time employment.


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5. INVESTMENT BEHAVIOUR

5.1 Investment in securities products

Respondents were asked whether they had invested in certain securities products otherthan HKEx stocks and derivative products.

Of the adult population, 9% invested (currently holding or had traded in the past 12months) in securities investment funds (excluding provident funds and Tracker Fund).The figure is more than 4 times the 2% in 1997.

4% of the adult population invested in stocks traded on overseas or Mainland marketsand 1% invested in debt securities.

A significantly larger proportion of stock investors and derivatives investors investedin the securities products above. (Figure 6)

Figure 6. Investment in securities products other than HKEx stocks andderivative products

9%

4%

1%

29%

14%

5%

36%

21%

11%

0%

10%

20%

30%

40%

Securities investment funds (excludingprovident funds and Tracker Fund)

Stocks traded on overseas or Mainland markets

Debt securities

Hong Kong adults Stock investors Derivatives investors


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5.2 Stock investment experience

The number of new stock investors who entered the market within the past 2 yearsdropped to 19% from 32% in 1997 and 30% in 1994. The median number of yearsinvolved in Hong Kong stock trading is six, the same as the findings in 1997 and 1994.One-third of the stock investors had over 10 years’ experience. (Figure 7)

Figure 7. Number of years involved in Hong Kong stock trading

30%

24%

18%

28%

32%

23%

17%

28%

19%

29%

19%

33%

0%

5%

10%

15%

20%

25%

30%

35%

2 years or less Over 2 years to5 years

Over 5 years to10 years

Over 10 years

Perc

enta

ge o

f sto

ck in

vesto

rs

1994 1997 2001

5.3 Number of listed company shares held

Most stockowners (60%) held shares of three or less listed companies. The mediannumber of listed company shares held is three, the same as the findings in 1997.(Figure 8)


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Figure 8. Number of listed company shares held

29%

39%

18%

14%

22%

43%

21%

14%

2%

36%

21%

16%

2%1%

22%

0%

10%

20%

30%

40%

50%

Nil * 1 2-3 4-5 6 or more Don't know Refusals

Perc

enta

ge o

f st

ocko

wne

rs

1994 1997 2001

* Holding either warrants or Exchange Traded Funds.

5.4 Stock portfolio size

Over half of the stockowners (52%) held stocks of a current value of HK$100,000 orbelow. The median value of stock holding is HK$95,000, down one-third fromHK$150,000 in 1997. (Figure 9) Note that this was against the background of a dropof 24% in the Hang Seng Index between September 1997 to December 2001.

Figure 9. Value of stock holding

12%13%

21%

10%

8%

14%

6%

1%

24%

12%

18%

35%

11%

16%

20%

25%

10%10%

17%18%

0%

10%

20%

30%

40%

$20,000 orbelow

$20,001 -$40,000

$40,001 -$60,000

$60,001 -$100,000

$100,001 -$200,000

More than$200,000

Don't know Refusals

Perc

enta

ge o

f sto

ckow

ners

1994 1997 2001


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Expressing the value of stock holding as a ratio of monthly personal income, themedian was 4.5 times, which was substantially lower than the corresponding ratio of6.9 recorded in September 1997.

5.5 Investment time frame

Stock investors held stocks for a longer period when compared with the previoussurveys. The median duration of stock holdings was 18 months, an increase from 4months in 1997 and 8.5 months in 1994. However, 42% of stock investors did nothave a fixed pattern. (Figure 10)

Figure 10. Duration of stock holding

26%

31%

12%12%

6%

11%12%

6%

9%

32%

42%

18%

13%

43%

28%

0%

10%

20%

30%

40%

50%

Less than 3 months 3 months - less than 6months

6 months - less than12 months

1 year or more Not fixed

Perc

enta

ge o

f sto

ck in

vesto

rs

1994 1997 2001

5.6 Number of transactions

The median number of transactions made in the past 12 months was three in 2001, thesame as that in 2000 and 1999, but a substantial drop from ten in 1997. Notably,33% of the stock investors did not make any trades in the past 12 months, much higherthan 23% in 2000. (Figure 11)


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Figure 11. Number of transactions made in the past 12 months

0%

10%

20%

30%

40%

50%Pe

rcen

tage

of

stoc

k in

vest

ors

1994 13% 27% 16% 10% 16% 18% 0%

1997 3% 14% 12% 11% 19% 39% 2%

1999 29% 15% 16% 10% 11% 17% 3%

2000 23% 24% 11% 9% 15% 17% 2%

2001 33% 15% 11% 6% 11% 22% 3%

Nil 1 to 2 3 to 4 5 to 6 7 to 10 More than 10Forgotten /

refusals

5.7 Average deal size

Most stock investors (69%) usually traded HK$100,000 or less in each transaction,and 27% had a usual transaction value of HK$20,000 or below. The median value ofeach transaction was HK$30,000, which was substantially lower than the HK$50,000in 1997. Note that the HSI dropped 24% between September 1997 to December2001 and the average daily turnover value dropped 48% between 1997 to 2001.Moreover, 25% of the stock investors had no fixed pattern. (Figure 12)

Figure 12. Usual value of each transaction

17%

20%

24%

10%

15%16% 16%

15%

27%

19%

13%

10%

5%

25%

29%

9%

29%

0%

10%

20%

30%

40%

HK$20,000 orless

HK$20,001 -HK$40,000

HK$40,001 -HK$60,000

HK$60,001 -HK$100,000

More thanHK$100,000

Not fixed

Perc

enta

ge o

f sto

ck in

vesto

rs

1994 1997 2001


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5.8 Risk preference

Stock investors were asked to indicate their willingness to take risk for a higher returnon an 11-point scale with 0 being “very conservative”, 5 being “average” and 10 being“very aggressive”. 30% stock investors were more or less conservative (giving ascore between 0 and 4), 42% were average (score 5) and 29% were more or lessaggressive (score 6 to 10). The average score is 4.8. (Figure 13)

Figure 13. Willingness to take risk

4%0%

6%10%9%

42%

7%8%3%1%

11%

0%

20%

40%

60%

80%

100%

109876543210

Perc

enta

ge o

f st

ock

inve

stor

s

Veryaggressive

AverageVeryconservative

5.9 What would make investors trade more

Stock investors were asked, if various changes were introduced to the Hong Kongstock market, whether they would participate more in stock trading — either bymaking more transactions or by increasing the value of their transactions. Amongthese factors, the most favourable ones included more high-quality listed companies inthe market (64% of stock investors answered favourably) and lower transaction cost(47%). (Figure 14)


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Figure 14. Changes to the Hong Kong stock market to make investors trade more

64%

47%

34%

31%

21%

18%

13%

2%

2%

2%

1%

1%

3%

16%

0% 10% 20% 30% 40% 50% 60% 70%

More high-quality listed companies in the market *

Lower transaction cost *

More convenient trading channels such as online trading *

Extended trading hours *

More derivative products for hedging / arbitrage *

Active stock market

Better economy in Hong Kong

Lower stock price

Higher transparency of listed companies

More stable market

Lower interest rate

More information about the market, listedcompanies and investment products, etc

Others

None of the above


* Read out to respondents while others were given by respondents.Note: Multiple answers were allowed.

5.10 Investment behaviour by type of stock investors

Apart from online traders, whose characteristics are discussed in section 6, differenttypes of stock investors also showed different investment behaviour, compared tostock investors as a whole: (Table 5)

• Stock-and-derivatives investors were more active traders — holding stocks for ashorter time period and trading more frequently. They were also more aggressive.

• New stock investors were less active traders — holding a smaller number of stocksand trading less frequently. Their value of stock holding and the usual value ofeach transaction were much smaller.


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Table 5. Investment behaviour by stock investor type

(median)

Stockinvestors

Stock-onlyinvestors

Stock-and-derivatives

investors

New stockinvestors

Number of years involved in Hong Kongstock trading

6 6 6 < 2

Number of listed company shares heldamong stockowners

3 3 3 1

Value of stock holding among stockowners(HK$)

95,000 85,000 95,000 15,000

Ratio of value of stock holding to monthlypersonal income among stockowners

4.5 4.3 5.1 1.5

Duration of stock holding (months) 18 18 9 18

Number of transactions made in past 12months

3 2 6 1

Usual value of each transaction (HK$) 30,000 30,000 30,000 10,000

Willingness to take risk for higher return(mean score)

4.8 4.6 5.3 4.4

6. ONLINE TRADERS

6.1 Incidence and proportion of online traders

18% of stock investors were online traders. Compared to overall stock investors,online traders comprise a higher proportion of stock-and-derivatives investors (34% vs24% of all stock investors).

Over half of online traders relied heavily on online trading — 30% traded online allthe time and 26% traded online most of the time. However, about one-third of onlinetraders seldom used online trading. (Figure 15)

Figure 15. Usage of online trading by online traders

All the time30%

Most of the time26%

Half of the time12%

Seldom32%


- 22 -


6.2 Reasons for trading / not trading online

The main reasons for using online trading included convenience (77%), timelyexecution (21%) and low commission rate (14%). (Figure 16)

Figure 16. Reasons for using online trading

77%

21%

14%

12%

12%

6%

3%

1%

1%

1%

1%

1%

10%

0% 20% 40% 60% 80% 100%

Convenient

Timely execution

Low commission rate

Providing real-time quotes online

Able to make transactions directly by oneself

Avoiding mistakes of brokers

Having privacy without involving third parties

Able to place orders during off-trading hours

Market and listed companies' information available online

Easy to use

Able to trade overseas securities

Providing comprehensive information

Others

Percentage of online traders


For stock investors who had not traded Hong Kong stocks through electronic media,the main reasons were lack of knowledge on using computer/Internet/online trading(39%), lack of confidence in online trading/online brokers (25%) and inconvenience touse online trading/Internet inaccessible (21%). (Figure 17)


- 23 -


Figure 17. Reasons for not using online trading

45%

35%

28%

13%

6%

7%

2%

0% 10% 20% 30% 40% 50%

Do not know how to use computer/Internet/online trading

Lack of confidence in online trading/online brokers

Inconvenience to use online trading/ Internet inaccessible

Prefer traditional method

Have not made transaction recently

Others

Refusals

Percentage of non-online traders


6.3 Investment behaviour of online traders

Compared to stock investors, online traders participated in Hong Kong stock tradingfor a shorter period of time. They were more active traders — holding stocks for ashorter duration and trading more frequently — and were more aggressive.

Compared to non-online traders, online traders held larger value of stock.

Table 6. Investment behaviour of online traders

(median)Stock

investorsOnlinetraders

Non-onlinetraders

Number of years involved in Hong Kong stock trading 6 4 6

Number of listed company shares held amongstockowners

3 3 3

Value of stock holding among stockowners (HK$) 95,000 95,000 85,000

Ratio of value of stock holding to monthly personalincome among stockowners

4.5 4.3 4.5

Duration of stock holding (months) 18 9 18

Number of transactions made in past 12 months 3 10 2

Usual value of each transaction (HK$) 30,000 30,000 30,000

Willingness to take risk for higher return (mean score) 4.8 5.2 4.7


- 24 -


7. THE USE OF INTERMEDIARY SERVICES

7.1 Type of broker used

About half of stock investors (49%) traded through banks only, substantially up from30% in 1997. 40% of stock investors traded through brokerage firms only, downfrom 56% in 1997. 10% of stock investors traded through both banks and brokeragefirms, with 7% usually trading through brokerage firms and 4% usually tradingthrough banks. (Figure 18)

Figure 18. Type of broker used in stock trading (1992-2001)

69

54 56

40

27

3930

49

10105 1

22

321

0%

20%

40%

60%

80%

100%

1992 1994 1997 2001

Perc

enta

ge o

f st

ock

inve

stor

s

Brokerage firms only Banks only Both brokerage firms and banks Through relatives or friends Others

Compared to all stock investors, a larger proportion of new stock investors (72%) andonline traders (58%) traded through banks only. (Figure 19)

Figure 19. Type of broker used in stock trading by type of investor (2001)

40 40 41

2521

49 49 4772

58

10 10 13212

1 1 2

0%

20%

40%

60%

80%

100%

All stock investors Stock-only investors Stock-and-derivativesinvestors

New stock investors Online traders

Perc

enta

ge o

f st

ock

inve

stor

s

Brokerage firms only Banks only Both brokerage firms and banks Through relatives or friends


- 25 -


For investors who traded through both brokerage firms and banks, it was identifiedwhether the brokerage firm or bank was their usual broker. For the purpose ofcomparative analysis in sections below, investors usually trading through brokeragefirms were grouped together with those trading through brokerage firms only and asimilar approach was used for those trading through banks.

7.2 Reasons for choosing the broker

Overall, the main reasons for choosing the broker currently used were good brokerageservices (37%) such as efficient order execution and convenient settlement, soundbackground of the broker (37%) — having confidence in their financial backgroundand good business record, peer factor (19%) such as recommendation by relatives orfriends, and good service/conduct/knowledge of broker or account executive (18%)such as being friendly and helpful.

A substantial proportion of stock investors who traded through banks (54%) chosebanks as their brokers for their sound background. (Figure 20)

Figure 20. Reasons for choosing the broker currently used for stock trading

37 37

1918

13

10 9

1

41

17

33

26

5

18

9

1

34

54

710

21

2

9

10

10

20

30

40

50

60

Good brokerageservices

Soundbackground of

the broker

Peer factor Good service /conduct /

knowledge ofbroker oraccount

executive

Extensive /conveniently

located outlets

Low charges Others Don't know

Per

cent

age

of s

tock

inve

stor

s

All stock investors Stock investors using brokerage firms Stock investors using banks


7.3 Commission charged by brokers in stock trading

Over one-third (36%) of stock investors were charged a rate of 0.25% to 0.39%commission by their brokers. 8% of stock investors were charged less than 0.25%,the minimum brokerage commission rate. The median commission rate charged was0.3%. However, about half of stock investors did not know or were not sure of thecommission rate charged by their brokers.

A larger proportion of stock investors who traded through brokerage firms werecharged less than 0.39% (55% vs 36% for those trading through banks). (Figure 21)


- 26 -


Figure 21. Commission charged by brokers

8%

36%

8%

1%

47%

11%

44%

6%

39%

6%

30%

9%

1%

55%

0%

10%

20%

30%

40%

50%

60%

Less than 0.25 % 0.25 % - 0.39 % 0.40 % - 0.59 % 0.60 % or more Don't know / Not sure

Perc

enta

ge o

f sto

ck in

vesto

rs

All stock investors Stock investors using brokerage firms Stock investors using banks

7.4 Investment behaviour of stock investors by type of broker used

Compared to stock investors trading through banks, those trading through brokeragefirms had longer investment experience, were more active traders — holding stocksfor shorter time periods and trading more frequently, and were more aggressive.(Table 7)

Table 7. Investment behaviour of stock investors trading through differenttypes of broker

Type of broker used

(median)Overall

Brokeragefirms

Banks

Number of years involved in Hong Kong stock trading 6.0 8.5 4.0

Number of listed company shares held amongstockowners

3 3 2

Value of stock holding among stockowners (HK$) 95,000 150,000 65,000

Ratio of value of stock holding to monthly personalincome among stockowners

4.5 5.5 4.0

Duration of stock holding (months) 18 9 18

Number of transactions made in past 12 months 3 4 2

Usual value of each transaction (HK$) 30,000 30,000 30,000

Willingness to take risk for higher return (mean score) 4.8 5.1 4.4


- 27 -


7.5 Satisfaction with broker services

Overall, most stock investors (80%) were satisfied with the services provided by theirbrokers in stock trading.

Among the services, investors were most satisfied with the clearing and settlement oftransactions (81% satisfied), handling orders on a timely basis (75% satisfied), custodyservice (72% satisfied) and response to price inquiries (72% satisfied).

A considerable proportion of stock investors did not use services other than thosedirectly related to stock trading execution, such as investment advice and response toinquiries on new products. (Figure 22)

Higher investor satisfaction was obtained for the services provided by brokerage firmsthan those provided by banks, both on an overall basis and by each kind of service.

One-third of stock investors (33%) gave suggestions for improving the servicesprovided by their brokers. Suggestions include reduction in transaction fee/commission (9% of all stock investors) and more responsiveness to investors’inquiries (7%). (Figure 23)


- 28 -


Figure 22. Satisfaction with broker services

10

19

14

28

38

33

38

49

43

49

51

50

67

79

72

66

80

72

65

86

75

74

89

81

74

86

80

5

4

5

14

18

16

10

10

10

13

15

14

11

8

10

13

8

11

15

7

11

11

6

9

15

8

12

3

2

10

8

9

8

6

7

10

8

9

8

4

6

7

2

5

10

3

7

6

4

5

3

4

82

75

79

49

36

43

44

35

40

28

26

27

15

9

12

14

10

13

11

5

8

9

4

7

6

3

5

1

2

0% 20% 40% 60% 80% 100%

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall

Banks

Brokerage firms

Overall


Satisfied Average Dissatisfied Not needed / not provided

Overall satisfaction with services provided by broker in stock trading

Clearing and settlement of transactions

Handling orders on a timely basis

Custody service

Response to price inquiries

Provision of stock information

Response to inquiries on new products

Investment advice

Margin service

Overall

Overall

Overall

Overall

Overall

Overall

Overall

Overall

Overall


- 29 -


Figure 23. Suggestions for broker service improvements

9%

7%

4%

3%

2%

2%

1%

1%

12%

0% 2% 4% 6% 8% 10% 12% 14%

To reduce the transaction fee / commission

To be more responsive to investors' inquiries

To handle orders on a timely basis

To provide better investment advice

To provide more information on stocks and listed companies

To provide more information on investment products

To strengthen the training in professional knowledge of broker staff

Wider coverage of stocks in research

Others *


* Suggestions each mentioned by less than 1% of stock investors.


8. PERCEPTIONS OF THE HONG KONG STOCK MARKET

8.1 Views on the stock market

About half or more of stock investors were positive on the various aspects of the HongKong stock market. Compared with all stock investors, new stock investors weremore positive or less negative on each of the aspects.

Most stock investors agreed that trading in the Hong Kong stock market was efficient(89% agreed vs 3% disagreed), market information available was good (72% agreedvs 13% disagreed), the Hong Kong stock market was a fair and orderly market (72%agreed vs 18% disagreed), there were sufficient high-quality listed companiesavailable for investment (70% agreed vs 20% disagreed) and regulation of brokers waseffective (69% agreed vs 18% disagreed).

The majority of stock investors agreed that regulation of listed companies waseffective (64% agreed vs 24% disagreed), listed companies had good disclosure ofinformation (58% agreed vs 24% disagreed), investors were well-protected (57%agreed vs 31% disagreed) and listed companies had good corporate governance (52%agreed vs 28% disagreed). About half of the stock investors agreed that transactioncosts were low (50% agreed vs 29% disagreed) and regulation of insider trading waseffective (46% agreed vs 37% disagreed). (Figure 24)


- 30 -


Figure 24. Views on Hong Kong stock market

55

46

49

50

60

52

62

57

67

58

70

64

70

69

72

70

81

72

76

72

89

89

4

5

13

10

10

11

11

7

11

12

9

8

9

6

8

6

3

7

8

8

5

4

23

37

23

29

20

28

21

31

17

24

17

24

15

18

15

20

11

18

10

13

3

18

12

15

11

10

10

6

4

6

7

3

4

7

7

6

5

5

4

7

7

4

42

0% 20% 40% 60% 80% 100%

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

New stock investors

All stock investors

Percentage of investors

Agree Average Disagree No comment / not sure

Trading in the Hong Kong stock market is efficient

Market information available is good

Hong Kong stock market is a fair and orderly market

There are sufficient high-quality listed companies available for investment

Regulation of brokers is effective

Regulation of listed companies is effective

Listed companies have good disclosure of information

Investors are well-protected

Listed companies have good corporate governance

Transaction costs are low

Regulation of insider trading is effective

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors

All stock investors


- 31 -


8.2 Views on Hong Kong listed China stocks

Almost all stock investors (97%) had heard of Hong Kong listed China stocks (i.e. Hshares and red chips).

For those who had heard of Hong Kong listed China stocks, most agreed that they hadmore confidence in investing in Chinese companies listed in Hong Kong than thoselisted in the Mainland (83%). While more agreed than disagreed that there weresufficient high-quality Chinese companies listed in Hong Kong for investment (60%agreed vs 27% disagreed) and that these stocks had high growth potential (48% vs30%), most of them were of the view that these stocks were risky (81%).

13% agreed (vs 63% disagreed) that Hong Kong listed China stocks had goodcorporate governance and 17% agreed (vs 64% disagreed) that these stocks had gooddisclosure of information. 20% agreed (vs 64% disagreed) that they had confidencein the regulation of Hong Kong listed China stocks. (Figure 25)

Figure 25. Views on Hong Kong listed China stocks

83

81

60

48

20

17

13

5

7

12

10

9

11

11

10

27

30

64

64

63

4

4

6

10

6

10

14

2

0% 20% 40% 60% 80% 100%

Having more confidence in investing inChinese companies listed in Hong Kong than those listed in the Mainland

Hong Kong listed China stocks are risky

There are sufficient high-quality Hong Kong listed Chinese companies available for investment

Hong Kong listed China stocks have high growth potential

Having confidence in the regulation of Hong Kong listed China stocks

Hong Kong listed China stocks have good disclosure of information

Hong Kong listed China stocks have good corporate governance


Agree Average Disagree No comment / not sure


- 32 -


8.3 Interest in trading overseas stocks through HKEx

About one-quarter (26%) of stock investors showed interest in trading overseas stocksthrough HKEx. However, 49% were not interested at all. A larger proportion ofonline traders (41% of them) showed interest. (Figure 26)

Figure 26. Interests in trading overseas stocks through HKEx

Not so interested21%

Not interested at all49%

No comment /don’t know

4%

Very interested4%

Quite interested22%

*** End ***

RETAIL INVESTOR SURVEY 2001 · CSU - Research & Policy, HKEx 2 May 2002 - 4 - Retail Investor...

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Transcript of RETAIL INVESTOR SURVEY 2001 · CSU - Research & Policy, HKEx 2 May 2002 - 4 - Retail Investor...