Hong Kong Stock Exchange

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Hong Kong Stock Exchange
香港交易所
Type Stock exchange
Location Central, Victoria City, Hong Kong
Founded 1891
Owner Hong Kong Exchanges and Clearing
Key people Charles Li (CEO)
Chow Chung-kong (Chairman)
Currency Hong Kong dollar
No. of listings 1,421[1]
Market cap HK$16.985 trillion (Nov 2011)[2]
Indexes Hang Seng Index
Website www.hkex.com.hk
Hong Kong Stock Exchange
Chinese 香港交易所
Alternative Chinese name
Chinese 港交所

The Hong Kong Stock Exchange (SEHK) is a stock exchange located in Hong Kong. It is Asia's second largest stock exchange in terms of market capitalization behind the Tokyo Stock Exchange, and the sixth largest in the world behind Euronext. As of 30 November 2013, the Hong Kong Stock Exchange had 1,615 listed companies, 776 of which are from mainland China, 737 from Hong Kong and 102 from abroad (e.g. Cambodia, Italy, Kazakhstan, etc.) [2] Hong Kong Exchanges and Clearing is the holding company for the exchange.

History[edit]

Hong Kong Exchange Trade Lobby

Records of securities trading in Hong Kong date back to 1866. In 1891 when the Association of Stockbrokers in Hong Kong was established, Hong Kong had its first formal stock market. It was renamed The Hong Kong Stock Exchange in 1914. By 1972, Hong Kong had four stock exchanges in operation. There were subsequently calls for the formation of a unified stock exchange. The Stock Exchange of Hong Kong Limited (the Exchange) was incorporated in 1980 and trading on the Exchange finally commenced on 2 April 1986. Since 1986, a number of major developments have taken place. The 1987 market crash revealed flaws in the market and led to calls for a complete reform of the Hong Kong securities industry. This led to significant regulatory changes and infrastructural developments. As a result, the Securities and Futures Commission (SFC) was set up in 1989 as the single statutory securities market regulator. The market infrastructure was much improved with the introduction by the Exchange of the Central Clearing and Settlement System (CCASS) in June 1992 and the Automatic Order Matching and Execution System (AMS) in November 1993. Since then, the framework of market rules and regulations, both Exchange-administered or otherwise, have been undergoing continuing review and revision to meet changing market needs while ensuring effective market regulation. The Exchange Listing Rules have been made more comprehensive, and other existing regulations have been improved or new regulations introduced to enhance market development and investor protection. Enhancements were also made to the system infrastructure, including the launch of off-floor trading terminals in brokers’ offices in January 1996. The third generation of the trading system, AMS/3, will be launched in 2000. It will provide enhanced functionality and a platform for a straight-through transaction process. In respect of market and product development, there are the listing of the first derivative warrant in February 1988, the listing of the first China-incorporated enterprise (H share) in July 1993; and the introduction of regulated short selling in January 1994 and stock options in September 1995. Furthermore, the Exchange introduced the Growth Enterprise Market (GEM) in November 1999 to provide fund raising opportunities for growth companies of all sizes from all industries, and to promote the development of technology industries in the region. However, in order to meet the challenge from technological advances, globalisation of the international financial markets and the needs of the increasingly sophisticated investors both locally and overseas, fundamental reform of the existing market structure is needed. According to the reform plan announced in March 1999, the Exchange, the Hong Kong Futures Exchange and their clearing houses will merge into a new holding company, the Hong Kong Exchanges and Clearing Limited. The new holding company will ultimately seek a listing on the Exchange.

Brief chronology[edit]

  • On 2 April 1986: a new trading hall is opened. At that time, a total of 249 companies were listed on the Exchange, total market capitalisation was HK$245 billion
  • 6 October 1986: Stock Exchange grand opening
  • October 1987: The Stock Exchange is closed for four days in an attempt to stop losses during Black Monday global equities market crash
  • May 1988: The Ian Hay Davison Report, commissioned to investigate practices on the exchange in the lead-up to its closure, is released, resulting in significant market reforms - although many took years to finally implement
  • On 24 June 1992, the Central Clearing and Settlement System (CCASS) is introduced
  • On 15 July 1993, in the Tsingtao Brewery became the first Chinese enterprise to list its H shares on the exchange.
  • On 1 November 1993, a new "Automatic Order Matching and Execution System", AMS/1, was introduced on the exchange; later, in January 1996, the second phase AMS/2 was introduced, becoming the basis of off-floor trading.
  • On 12 November 1999, the Tracker Fund of Hong Kong, created by government intervention during the 1997 Asian financial crisis, had its introduction on the exchange.
  • 25 November 1999, two companies were jointly listed on the newly created Growth Enterprise Market (GEM)
  • On 6 March 2000, The Stock Exchange, Futures Exchange and the Hong Kong Securities Clearing Company all became wholly owned subsidiaries of HKEx, which was in turn listed on 27 June 2000.
  • On 23 October 2000, AMS/3 was implemented on the exchange.

source: HK Ex[3]

Exchange history and predecessors[edit]

Association of Stockbrokers in Hong Kong (Founded 1891)
Template CanadianCityGeoLocation South.png
(1914) Renamed to Hong Kong Stock Exchange
Template CanadianCityGeoLocation South.png
(1947) A merger is made after World War II with Hong Kong Stock Exchange retaining the name
Template CanadianCityGeoLocation West.png Hong Kong Stockbrokers Association (Founded 1921)
Template CanadianCityGeoLocation South.png
Hong Kong Stockholders Association Ltd (Founded 1956) allow info sharing between HKSE and other exchanges
Template CanadianCityGeoLocation West.png Far East Exchange Ltd (Founded 1969) Template CanadianCityGeoLocation West.png Kam Ngan Stock Exchange Ltd (Founded 1971) Template CanadianCityGeoLocation West.png Kowloon Stock Exchange Ltd (Founded 1972)
Template CanadianCityGeoLocation South.png
(1986) HKSE merges with other exchanges and retain the name but also presented as Stock Exchange of Hong Kong
Template CanadianCityGeoLocation South.png
(2000) Hong Kong Exchanges and Clearing becomes the holding company for Hong Kong Stock Exchange
Template CanadianCityGeoLocation West.png Hong Kong Futures Exchange Ltd (Founded 1976) Template CanadianCityGeoLocation West.png Hong Kong Securities Clearing Company Ltd (Founded 1989)

Trading hours[edit]

Russian President Dmitry Medvedev with exchange Chairman Ronald Arculli during a visit to Hong Kong on 17 April 2011.

The trading day consists of:

  • A pre-opening auction session from 9:00 am to 9:30 am. The opening price of a security is reported shortly after 9:20 am.[4]
  • A morning continuous trading session from 09:30 am to 12:00 pm[4]
  • An extended morning session from 12:00 noon to 1:00 pm, also referred to as the lunch break.[4][5] Continuous trading proceeds in specifically-designated securities (currently two ETFs, 4362 and 4363). Trading in other securities is not possible. However, previously-placed orders in any securities can be cancelled from 1:00 pm onwards.[6]
  • An afternoon continuous trading session from 1:00 pm to 4:00 pm[4]

The closing price is reported as the median of five price snapshots taken from 3:59 to 4:00 pm every 15 seconds.[7] In May 2008, the exchange also implemented a closing auction session to run from 4:00 pm to 4:10 pm, with a similar pricing mechanism as the opening auction; however, this resulted in significant fluctuations in the closing prices of stocks and suspicions of market manipulation. Initially, the exchange proposed limiting price fluctuations in the auction sessions to 2%; in the end, they removed the closing session entirely in March 2009.[8]

Up until 2011, trading hours comprised a pre-opening auction from 9:30 AM to 9:50 AM, followed by continuous trading from 10:00 AM to 12:30 PM and 2:30 PM to 4:00 PM. The two-hour lunch break between the morning and afternoon sessions was the longest among the world's 20 major stock exchanges. A 2003 proposal to shorten the lunch break failed due to opposition from brokers. Another plan to shorten the lunch break to one hour was floated by the exchange in 2010; the morning session would then start earlier, run from 9:30 am to 12:00 pm, and the afternoon session from 1:00 pm to 4:00 pm, leaving the closing time the same as before. Justifications included bringing hours into line with China. Reactions from both brokers and the restaurant industry were mixed.[9]

On 7 March 2011, the exchange extended its hours in the first of two phases. The morning session now runs from 9:30 am to 12:00 noon, followed by a ninety minute lunch break, and an afternoon session from 1:30 pm to 4:00 pm. Index futures and options now begin trading at 9:15 am, thirty minutes earlier than before, and close at the same time as before, 4:15 pm. On 5 March 2012, the lunch break will be cut to sixty minutes, with the afternoon session running from 1:00 pm to 4:00 pm.[5]

Electronic trading[edit]

Hkecon.jpg

Economy of Hong Kong

    Identity
        Hong Kong Dollar
          Banknotes
          Coins
        Monetary Authority
        Four Asian Tigers

    Resources
        Employment   Transport
        Tourism          Postal
        Agri/Aqua       Ports
        Manufacturing

    Companies
        Stock Exchange  GEM
        Companies listed on HKSE

Other Hong Kong topics
Culture - Education
Geography - History - Politics
Hong Kong Portal

The exchange first introduced a computer-assisted trading system on 2 April 1986.[10] In 1993 the exchange launched the "Automatic Order Matching and Execution System" (AMS), which was replaced by the third generation system (AMS/3) in October 2000.[11]

Regulatory role[edit]

David Webb, independent non-executive director of the Exchange since 2003, has been arguing for a super regulatory authority to assume that role as regulator, as there is inherent conflict between its commercial and regulatory roles. In the meantime, he argues for improved investor representation on the Hong Kong Stock Exchange.

In 2007, the uproar by smaller local stockbrokers over the decision by board of directors to cut minimum trading spreads for equities and warrants trading at between 25 HK cents and HK$2 caused the new board to vote to reverse the decision. The reforms were to be implemented in the first quarter, but was put back on the table following protests by brokers. Webb criticised the board for caving in to vested interests.[12]

Trading characteristics[edit]

  • It is perfectly normal for Hong Kong stocks of even well-known companies to trade at prices that correspond to less than HK$4 a share. A Hong Kong stock would not be considered a penny stock unless its price was less than about HK$ 0.50.
  • Each stock has its own individual board lot size (an online broker will usually display this along with the stock price when you get a quote); purchases in amounts which are not multiples of the board lot size are done in a separate "odd lot market".
  • There is a close-in-price rule for limit orders, which must be within 24 ticks of the current price. Individual brokers may impose an even stricter rule; for instance, HSBC requires limit orders to be within 10 ticks of the current price. Broker support for triggered order types such as market-if-touched orders would allow placing orders further away, which would be sent to the exchange when the price condition was established.

17 Largest stocks by market capitalisation[edit]

Source: Bloomberg, in billions of Hong Kong dollars, Data updated on 20 April 2010

  1. PetroChina: $2,492.04
  2. Industrial & Commercial Bank of China: $1,810.14
  3. China Mobile: $1,584.90
  4. China Construction Bank: $1,514.72
  5. HSBC Holdings: $1,433.27
  6. Bank of China: $1,127.57
  7. Sinopec Corp: $957.57
  8. China Life Insurance: $922.64
  9. China Shenhua Energy: $636.23
  10. CNOOC: $609.29
  11. Ping An Insurance Group of China: $448.11
  12. Bank of Communications: $439.83
  13. Standard Chartered Bank: $429.77
  14. China Merchants Bank: $366.36
  15. China Telecom: $309.16
  16. Sun Hung Kai Properties: $299.51
  17. Tencent Holdings: $286.53

See also[edit]

References[edit]

  1. ^ http://www.hkex.com.hk/eng/stat/statrpt/mkthl/mkthl201102.htm
  2. ^ a b http://www.hkex.com.hk/eng/listing/listhk/our_markets.htm
  3. ^ Trading Hall Renovation Moves Forward
  4. ^ a b c d Trading Hours, hkex.com.hk, 8 March 2011, retrieved 8 March 2011 
  5. ^ a b HKEx Receives Approval to Extend its Trading Hours from 7 March, hkex.com.hk, 24 January 2011 
  6. ^ Markets Make Smooth Transition to New Trading Hours, Hong Kong Exchanges and Clearing, 4 April 2011, retrieved 20 June 2011 
  7. ^ Closing Price Calculation, hkex.com.hk, 23 March 2009, retrieved 5 June 2009 
  8. ^ Ng, Katherine (13 March 2009), "HKEx scraps closing auction", The Hong Kong Standard, retrieved 5 June 2009 
  9. ^ Wan, Hanny (12 August 2010), "Hong Kong Brokers Balk at Prospect of Losing Their Long Lunch", Bloomberg News, retrieved 13 August 2010 
  10. ^ History of HKEx and its markets, hkex.com.hk, 20 January 2004, retrieved 11 February 2007 
  11. ^ "HKEx Builds its Market Infrastructure with Competitive Technology", HKEx Newsletter, October 2004, retrieved 3 June 2009 
  12. ^ Cheung, Jackie (15 February 2007), "Plan for tighter spreads dropped", The Hong Kong Standard, retrieved 19 March 2007 

External links[edit]

Coordinates: 22°17′03″N 114°09′28″E / 22.28414°N 114.15768°E / 22.28414; 114.15768