Investing in Hong Kong-Listed Stocks: Which Broker Is the Cheapest?
Sudhan Pâ—Ź
The Hong Kong stock market is home to famous China-based tech firms such as JD.com, Tencent, and Xiaomi.
And with the trade tensions between China and the US still simmering, we could see more growth companies like Pinduoduo, Baidu, and iQIYI having a secondary listing in Hong Kong in the future…
following the footsteps of JD.com, Alibaba and NetEase.
Reuters has reported that the US House of Representatives is expected to pass legislation this week that could block Chinese firms from the US stock market.
If the Holding Foreign Companies Accountable Act (HFCAA) becomes law ultimately, we could see a migration of Chinese companies that do not comply with the US government’s stringent requirements from the US stock market to the Hong Kong stock exchange…
providing opportunities for Singapore investors to invest in Chinese companies closer to home.
But whatever the outcome is, it would be good to learn about the intricacies of investing in Hong Kong-listed shares in case we need the knowledge in the future.
With that, let’s find out more about the Hong Kong stock market and the cheapest brokers to buy Hong Kong shares with.
Different Share Classes of the Hong Kong Stock Market
On top of providing access to Chinese companies incorporated on the mainland, the Hong Kong stock market (obviously) allows investors to buy Hong Kong-incorporated companies.
Due to the various types of companies listed on the Hong Kong stock exchange, it’s necessary to have different share classes or types to segregate the companies.
Here, let’s look at the various share classes available on the Hong Kong stock market:
| Share Class | Description | Examples |
|---|---|---|
| HK ordinary | Hong Kong-incorporated companies | AIA, HSBC, and Swire Pacific |
| H share | Chinese companies incorporated on the mainland | Bank of China, ICBC, and Ping An |
| P chip | Non-state-owned Chinese companies that are incorporated outside the mainland, but with a majority of its revenue or assets derived from mainland China | Alibaba, Tencent Holdings, and Xiaomi |
| Red chip | State-owned Chinese companies incorporated outside the mainland. They are substantially owned (directly or indirectly) by mainland Chinese state entities with the majority of its revenue or assets derived from mainland China. | China Mobile, CNOOC, and Mengniu Dairy |
The Major Index of Hong Kong
Just like Singapore’s stock market benchmark, the Straits Times Index (STI), there’s a similar index in Hong Kong.
And that’s called the Hang Seng Index (HSI).
It was launched way back in 1969 and has become the most widely used barometer of the Hong Kong stock market.
The HSI, which is made up of 50 of the biggest and most liquid shares, is weighted by free-float market capitalisation. The companies with larger market capitalisations will have higher weights in the index. But no company can represent more than 10% of the index value.
The components of the HSI are broken down into four sectors to better reflect the price movements of major industry sectors of the market.
Those sectors are:
- Finance
- Utilities
- Properties
- Commerce and Industry
The top five companies of the HSI are (weightings in brackets, as of October 2020):
- Tencent (11.48%)
- AIA (9.52%)
- HSBC (7.56%)
- China Construction Bank (6.59%)
- Alibaba (5.43%)
By share type, the HSI is made up of:
- HK ordinary (42.70%)
- P-chip (27.62%)
- H share (21.02%)
- Red chip (8.66%)
Listing on the Hong Kong Stock Exchange
In Hong Kong, shares are listed either on the Main Board or on the Growth Enterprise Market (GEM) of the stock exchange.
The Main Board is a market for established companies with a track record of earnings or companies meeting alternative financial requirements.
Meanwhile, GEM is a market for growth companies that do not fulfil the requirements of profitability or track record to be listed on the Main Board. The GEM is often seen as a stepping stone to the Main Board.
Hong Kong Stock Market Hours
Trading on the Hong Kong securities market is conducted from Monday to Friday (excluding public holidays) at the following times:
| Session | Time |
|---|---|
| Pre-opening session | 9:00 am to 9:30 am |
| Morning trading session | 9:30 am to 12:00 pm |
| Break/Extended morning session | 12:00 pm to 1:00 pm |
| Afternoon trading session | 1:00 pm to 4:00 pm |
| Closing auction session | 4:00 pm to a random closing between 4:08 pm and 4:10 pm |
Note: On the eves of Christmas, New Year and Lunar New Year, there are no extended morning and afternoon sessions.
Number of Shares to Buy at One Go
For Singapore stocks, the board lot size (standardised number of shares offered as a trading unit) is 100 shares.
However, in Hong Kong, the board lot size of listed security is determined by the issuer.
To know the lot size of companies listed in Hong Kong, investors can go to the Hong Kong Exchanges and Clearing Market website, search for the company they wish to buy, and find out the lot size from there.
For example, the lot size for Tencent Holdings (HKG: 0700) is 100 shares (highlighted in red box).
Buying Shares in Hong Kong
To buy shares listed on the Hong Kong stock exchange, you must open a brokerage account that allows access to that market.
To choose the best brokers (on top of low commissions), Seedly online brokerage review platform is the place to go!
Over there, you can sort according to “Most Popular”, “Most Reviewed”, and “Highest Rating”.
Once you have chosen the broker for you, you can simply head over to the broker’s site to start opening an account.
Here’s a list of the brokers that allows access to the Hong Kong market with their respective brokerage fees (for online trades only):
| Brokerage | Min. Fees (HK$) | Trading Commissions | Custodian Fees |
|---|---|---|---|
| Cash funded trading accounts | |||
| Tiger Brokers | 15 | 0.06% | N/A |
| Interactive Brokers (Fixed account) | 18 | 0.08% | N/A (maintenance fee applicable of up to US$10 per month, based on activity) |
| FSMOne | 50 | 0.08% | No custodian fee |
| Maybank Kim Eng Securities (Prefunded) | 50 | 0.12% | S$2 per counter per month |
| Phillip Securities (POEMS Cash Plus) | 50 (with asset value ≥ S$250k) to 80 (with asset value ≤ S$29,999) | 0.08% (with asset value ≥ S$250k) to 0.15% (with asset value ≤ S$29,999) | Waived (with asset value ≥ S$250k) or S$2 per counter per month (with asset value ≤ S$249,999) |
| SAXO Markets | 60 (VIP) to 90 (Classic) | 0.10% (VIP) to 0.15% (Classic) | 0.06% p.a. (VIP) to 0.12% p.a. (Classic) |
| DBS Vickers (Cash Upfront) | 80 (Cash upfront rates applicable to Multi-Currency Accounts only) | 0.15% | S$2 per counter per month |
| CGS-CIMB Securities (Cash Upfront Trading) | 88 | 0.18% | S$2 per counter per month |
| UOB Kay Hian (UTRADE Edge) | 100 | 0.18% | S$2 per counter per month |
| Standard Chartered | 0 (Priority Banking Clients) 100 (Personal Banking Clients) | 0.20% (Priority Banking Clients) 0.25% (Personal Banking Clients) | No custodian fee |
| Basic trading accounts | |||
| CGS-CIMB Securities | 88 | 0.25% | S$2 per counter per month |
| DBS Vickers | 100 | 0.18% | S$2 per counter per month |
| KGI Securities | 100 | 0.25% | None stated |
| Lim & Tan Securities | 100 | 0.25% | S$2 per counter per month |
| Maybank Kim Eng Securities | 100 | 0.20% (contract value above HK$250,000) 0.25% (contract value up to HK$250,000) | S$2 per counter per month |
| Phillip Securities | 100 | 0.25% | S$2 per counter per month |
| RHB Securities | 100 | 0.25% | S$2 per counter per month |
| UOB Kay Hian | 100 | 0.20% (contract value above HK$250,000) 0.25% (contract value up to HK$250,000) | S$2 per counter per month |
| OCBC Securities | 150 | 0.25% | S$2 per counter per month |
On top of brokerage and custodian fees for the brokers, investors also have to note other fees such as transaction levy (0.0027% of trade value) charged by the Hong Kong stock exchange and miscellaneous fees like dividend handling charges charged by brokers.Â
(Note: Custodian fees are waived if certain conditions are met. Typically, the fees will be waived if you trade at least two times per account per month or at least six times per account per quarter.)
Just like in Singapore, the settlement period for securities is T+2 days (where T is the transaction date). This means that the trade will be due for settlement two market days after buying/selling.
Are There Taxes Involved?
There’s some good news here!
Similar to how dividends are not taxed for Singapore-listed companies, there’s no withholding tax for dividends received from Hong Kong-listed stocks.
Have Burning Questions Surrounding The Stock Market?
Why not check out the SeedlyCommunity and participate in the lively discussion regarding stocks!
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock.Â
