How to analyse the trends of Hong Kong stocks
Domestic and overseas funds in the Hong Kong stock market are jointly promoted. Fundamentally, the market is affected by the US stock market and fluctuates due to the mainland stock market. Hong Kong stock traders can use external stock markets, such as overnight U.S. stocks trends and the performance of mainland A-shares, to analyse Hong Kong stocks. This is because Hong Kong stocks are highly correlated with the global financial markets and liquidity. In addition, many Hong Kong-listed stocks come from mainland China, so they are more aligned with the mainland economy and policy trends.In addition, the scale of the Southbound capital flow is also a valuable reference for analysing the trends of Hong Kong Stocks. The Southbound capital flow refers to the inflow of funds from the mainland. It is the counterpart to the Northbound capital flows, which refers to the inflow of A-shares from Hong Kong and international capitals. For the entire year of 2020, the net purchase of Hong Kong stocks by Southbound funds was HK$672.1 billion, 170% higher than in 2019, as the inflow of funds reached a record high.
Since the Shanghai-Hong Kong Stock Connect opening in 2014, southbound funds have continuously poured into the Hong Kong stock market. Retail investors and more institutional investors are expanding the scope of their investment in Hong Kong stocks. In the past three years, the southbound funds have seen net inflows into Hong Kong stocks. The popularity of mainland funds flocking to Hong Kong stocks will also increase the influence of Hong Kong stocks within the trading market. Analysing the sectors favoured by Southbound Funds, we find the leading Internet companies and new economy-related stocks being the most popular investments.
New economy stocks have been the most popular sector since last year. They refer to the economic ecosystem derived from Internet technology and generally relate to Internet finance, sustainable energy, consumption, medicine, etc. Among the top ten active Hong Kong stocks, Tencent and Alibaba are in this category. Among the top ten stocks in the Hang Seng Index last year, three were new economy stocks, including Xiaomi, Meituan, and Tencent.
How to invest in Hong Kong stock trading?
The Hong Kong stock market has no limits on trading uptrends and downtrends. It can be bought up or sold short, and the T+0 trading model is a feature that attracts investors.
There are many traditional trading methods for Hong Kong stocks. If possible, you can directly open a Hong Kong stock trading account, but the account opening process is cumbersome and takes a long time (usually about ten days). In many cases, you have to go to Hong Kong to open the account yourself. It may not matter if you go there physically, the whole process could take another month, and then the stock you wanted to buy may have risen before you finished opening your account.
Another method is opening an account through Hong Kong Stock Connect, the trading interconnection mechanism between the Hong Kong stock market and the A-shares market. Investors in the two locations can buy and sell the stocks listed on each other's exchanges through local securities companies or brokers. However, Hong Kong stocks cannot be traded via Hong Kong Stock Connect accounts. An average daily asset threshold of 500,000 in 20 days is a relatively high trading limit for investors with less capital.
We all know that trading stocks requires stamp duty (0.1% of the turnover), and trading Hong Kong stocks also requires settlement fees (0.002% of the turnover, minimum 5.5 HKD, and maximum 200 HKD), transaction levies (0.0027% of the turnover, Minimum HK$0.01), Stock Exchange transaction fee (0.005% of the transaction amount, minimum HK$0.01), etc. Therefore, the trading costs must be calculated before the transaction. Traders could use trading tools to calculate the cost.
Of course, you can also choose to trade Hong Kong stocks through brokers, which are divided into traditional brokers and online brokers. Traditional brokers are represented by Hong Kong, Chinese, foreign and local banks. In addition, Tiger Brokers and Futu Securities have emerged in recent years as respectable t online brokers. However, additional transaction commissions and platform usage fees (usually 15 Hong Kong dollars per transaction) are charged to trade Hong Kong stocks through a brokerage firm.
In addition, if you want to seek more convenient and flexible trading of Hong Kong stocks, you should consider trading stock CFDs, which have lower costs. CFDs are representations of the underlying stocks but do not involve the exchange of physical commodities or securities. The difference between the settlement price and the contract price is used as a cash settlement transaction. The low trading threshold should be one of its outstanding attractions. You may need to have thousands of funds to trade the markets through a traditional brokerage, but you only need a few hundred to trade CFDs. Of course, any transaction involved is bound to be risky, and the degree of risk tolerance required by different trading methods also varies. Investors must choose carefully according to their circumstances and research trading strategies before starting trading.
ATFX has officially launched Hong Kong stock CFDs trading. The most popular stock CFDs of more than 50 listed companies include banking stocks, technology stocks, pharmaceutical stocks, automotive stocks, insurance stocks, sports stocks, etc. Traders can capitalise on both rising and falling stock markets by opening short or long positions on their chosen stocks. Traders benefit from the daily price fluctuations of Hong Kong's most liquid stocks.
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