A recent survey by Hong Kong Exchanges and Clearing Limited (HKEx) shows that in 2005/06 local investors remained the major contributors to HKEx securities market turnover while overseas investors’ contribution to trading value was the highest in the past decade.

The Cash Market Transaction Survey 2005/06 reveals that from October 2005 to September 2006 local investors continued to be the major contributors (53 per cent) of total market turnover, down from 56 per cent in 2004/05.  Overseas investors contributed 42 per cent — mainly institutional (39 per cent) rather than retail (3 per cent) — to the total market turnover in 2005/06, up from 36 per cent in 2004/05 and the highest level in the past decade.  The remaining 5 per cent was from Stock Exchange Participants’ (EPs) principal trading (trading on the firm’s own account).

Among the various investor types, overseas institutional investors were the largest contributors (39 per cent) in 2005/06, up from 34 per cent in 2004/05.  The contribution from local retail investors was 27 per cent in 2005/06, down from 30 per cent in 2004/05 and that from local institutional investors was 26 per cent, similar to the 27 per cent in 2004/05.  The contribution of overseas retail investors remained small (3 per cent of the market turnover value).

US investors were the major contributor to overseas investor trading in 2005/06 (26 per cent vs 29 per cent in 2004/05).  They were followed by investors from the UK (24 per cent vs 25 per cent in 2004/05) and the rest of Europe (23 per cent vs 22 per cent in 2004/05).  The aggregate contribution from Asia (excluding Hong Kong) to overseas investor trading was 21 per cent in 2005/06, up from 18 per cent in 2004/05.  Among the Asian economies, Singapore continued to contribute the largest market share of overseas investor trading in 2005/06 (9 per cent). 

Retail online trading accounted for 13 per cent of total retail investor trading in 2005/06, up from 11 per cent in 2004/05, and 4 per cent of total market turnover, a level maintained since 2003/04. 

The Cash Market Transaction Survey has been conducted annually since 1991.  For the 2005/06 survey, questionnaires were sent to a target population of 413 Stock Exchange Participants.  The response rate was 85 per cent by number and 95 per cent by turnover value of the target respondents.

The full report on the Cash Market Transaction Survey 2005/06 is available on the HKEx website at:http://www.hkex.com.hk/eng/stat/research/pages/research.aspx.

Note:	The survey’s target respondents were EPs. Their responses stemmed from their own understanding 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 overseas and were placed through that local institution, or vice versa. As a result, the findings may deviate somewhat from the true picture.

Figure 1.  Distribution of cash market trading value by investor type
(Oct 2005 – Sep 2006)    

Note: Numbers may not add up to 100 per cent due to rounding.

Figure 2.  Distribution of overseas investor trading value in cash market by origin
(Oct 2005 – Sep 2006)

Note: Numbers may not add up to 100 per cent due to rounding.

Figure 3.  Percentage share of online trading value in cash market 
(1999/2000 – 2005/06)

* The term “Internet trading” instead of “online trading” was used in the 1999/2000 survey.

Figure 4.  Distribution of cash market trading value by investor type
(1996/97 – 2005/06)

Note: Numbers may not add up to sub-totals or 100 per cent due to rounding.