The Hong Kong Retail Investment Market

With the backdrop of a record stock market boom since 2002 (a 42% CAGR from 2002 to 2007), Hong Kong’s retail investor base has undergone rapid growth. Celent estimates there are more than 2 million retail investors in Hong Kong, of which around 10% are active traders.

In a new report, The Hong Kong Retail Investment Market, Celent provides a comprehensive overview of the retail investment market in Hong Kong, with a focus on active trader segment. The financial markets in Hong Kong are well-developed and mature. Hong Kong’s financial sector has a very high market value to GDP ratio of almost 600%. The financial sector’s output is approximately 17% of the GDP, significantly higher than other markets in the region.

Hong Kong’s retail investors tend to be well-educated and have relatively high income. Active traders are growing at one of the highest levels in the world. Despite their outward level of sophistication, however, active traders in Hong Kong largely stick to equities trading and are apprehensive about investing in overseas markets or trading in derivatives products; 17% of the number of contracts in the derivatives market came from local investors, and this share has declined in the last five years. Hong Kong’s active traders are not very enthusiastic about new products: only 19% are always on the look out for new products, significantly less than other countries.

"French insurers should consider IT initiatives emphasizing best-in-class online insurance platforms, flexibility of core applications, business process management, and modern integration," he adds.

"Investors are apprehensive about derivatives because of the large risks involved, and some have already lost money in the derivative market," says Arin Ray, Celent analyst and author of the report. "Although these products require a good deal of sophistication to trade, retail investors, especially the active traders, are keen on learning and they use a variety of sources for this purpose."

Equities gather the lion’s share of products, while local retail investors constitute 28% of cash market trading value. The mutual fund market is also undergoing significant growth.

Banks have a firm grip on the brokerage market: almost 70% retail stock investors trade through banks. There is a strong preference among retail investors for online trading. In 2008, an estimated 18% of retail stock trading value and 40% of retail derivative volume were executed online. This has caused the number of online brokerages to increase sharply in the last few years, resulting in fierce competition for customers.

This report presents an in-depth analysis of the retail traders by looking at investors’ contributions in different categories based on capital allocation, demography, and investment attitude. A separate section examines the trading style of active traders. The report also provides an overview of Hong Kong’s financial markets and products for retail investors.

This 34 page report contains 28 figures. A table of contents is available online.

Members of Celent's Wealth Management research service can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.