Local retail contribution to stock market increases

Statistics

14 Mar 2005

A recent survey by Hong Kong Exchanges and Clearing Limited (HKEx) shows that local retail investors have overtaken overseas institutional investors for the first time in four years to be the largest contributors to market turnover value in the HKEx securities market.

The Cash Market Transaction Survey 2003/04 reveals that from October 2003 to September 2004 local investors contributed 57 per cent of total market turnover value, while overseas investors, mainly institutional investors, contributed 36 per cent. The remaining 7 per cent was from Stock Exchange Participants' (EPs) principal trading (trading on the firm's own account).

Local retail investors contributed 34 per cent of total market turnover value (up from 30 per cent in 2002/03) and local institutional investors contributed 22 per cent (down from 28 per cent in 2002/03). Overseas institutional investors contributed 33 per cent of total market turnover value and overseas retail investors 3 per cent.

United Kingdom investors remained the largest overseas group, contributing 28 per cent of overseas investor trading (up from 25 per cent in 2002/03), followed by the United States (25 per cent, up from 22 per cent in 2002/03) and the rest of Europe (24 per cent, same as in 2002/03). The aggregate contribution of Asian investors to overseas investor trading was 20 per cent, down from 22 per cent in 2002/03. Singapore and Mainland China were the largest Asian contributors, constituting 8 per cent and 7 per cent of overseas investor trading respectively.*

In the survey, EPs in the target population were divided into three groups with equal shares by turnover value - eight large-sized brokers, 19 medium-sized brokers and 395 small-sized brokers. Almost half of local investor trading (47 per cent) was channelled through small-sized brokers, while overseas investor trading was mainly channelled through medium- and large-sized brokers (43 per cent and 40 per cent respectively).

The majority of trading from the United Kingdom was channelled through large-sized brokers (46 per cent) and medium-sized brokers (43 per cent); the majority from the rest of Europe (57 per cent) through medium-sized brokers; and the majority from the United States (53 per cent) through large-sized brokers. Small-sized brokers had the majority market share in channelling trading from Japan, Mainland China and Taiwan (about 60 per cent respectively). Trading from Singapore was channelled mainly through large-sized brokers (46 per cent) and medium-sized brokers (42 per cent).

Online trading accounted for 10 per cent of retail investor trading, up from 9 per cent in 2002/03 (or 4 per cent of total market turnover, up from 3 per cent in 2002/03). This was the highest percentage since the survey began assessing this characteristic in 1999/2000.

The Cash Market Transaction Survey has been conducted annually since 1991. For the 2003/04 survey, questionnaires were sent to all 422 Stock Exchange Participants in the target population. The response rate was 92 per cent by number or 97 per cent by turnover value of respondents.

The full report on the Cash Market Transaction Survey 2003/04 is available on the HKEx website at: http://www.hkex.com.hk/.

The survey's target respondents were EPs. Their responses stemmed from their own understanding of the origins of their clients. HKEx had no direct access to EPs' clients, nor could it verify their identities.

One of the limitations of the survey is that EPs might not know the true origins of all their client orders. For instance, an EP might classify transactions for a local institution as such when in fact the orders originated from overseas and were placed through that local institution, or vice versa. As a result, the findings may deviate somewhat from the true picture.

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Updated 14 Mar 2005