Hong Kong stock market

Capitalizing on the rapid development of Chinese economy, Hong Kong has become an important international financial center and is widely regarded as one of the fastest growing export-oriented economy in the Asia-Pacific region. In recent years, Hong Kong has successfully attracted enterprises from all over the world to list their companies here, especially Chinese enterprises. The market weighting of state-owned and privately-owned enterprises has increased gradually in the equity market, which suggests a growing impact of mainland Chinese economy on the development of Hong Kong stock market.

The benchmark Hang Seng Index is composed of 50 constituent stocks, representing about 60% of total market value coverage in Hong Kong. The constituents stocks are grouped under different sectors such as Finance, Telecommunications, Properties, Utilities and so forth, contributing more than 46% of daily aggregate market turnover. Apart from stocks of listed enterprises, there are also different kinds of securities available for trading such as warrants, Callable Bull/Bear Contracts (CBBC) etc.

Trading is conducted on Monday to Friday (excluding public holidays) at the following times:

Trading Hours

Auction Session

 

     Pre-opening Session

9:00 a.m. to 9:30 a.m.

Continuous Trading Session

 

     Morning Session

9:30 a.m. to 12:00 noon

     Afternoon Session

1:00 p.m. to 4:00 p.m.

There is no Extended Morning Session and Afternoon Session on the eves of Christmas, New Year and Lunar New Year.  There will be no Extended Morning Session if there is no Morning Session.

All stock trades in Hong Kong are settled on the second trading day after transaction date (T+2). Comparing with the stock markets in different neighbouring regions, Hong Kong has less trade restrictions as investors can immediately sell the stocks purchased earlier on the same trading day, and the stock market is free from interventions such as suspension and limitation on price fluctuations.

Warrant

Warrant is a right but not an obligation to buy or sell a certain underlying assets (stock, index, currency or commodity etc) at a pre-determined price (strike price) on or before a pre-determined date (Expiry Date).

Two types of warrants include Company Warrants and Covered Warrants.

Inline Warrant

Inline Warrants are a type of structured product that entitles the investors to receive a pre-determined fixed payment at expiry.  At expiry, investors will receive HK$1 per inline warrant held when the underlying asset falls at or within the Upper and Lower Strikes (In-The-Range) or HK$0.25 per inline warrant held when the underlying asset falls outside the Upper and Lower Strikes (Out-of-The-Range).

Due to the pre-determined fixed maximum payment at expiry of HK$1, an inline warrant should not be traded above HK$1.  Investors will suffer a loss by buying an inline warrant above HK$1.

Inline Warrants may be issued with a lifespan of six months to five years.  They may be bought and sold prior to their expiry on the cash market of HKEX.  At expiry, settlement is made in cash only.

Inline Warrants are issued by a third party, usually an investment bank, independent of HKEX and of the underlying asset.

Callable Bull/Bear Contracts (CBBC)

Callable Bull/Bear Contracts (CBBC) is a derivative product with terms similar to warrants such as strike price, expiry date and conversion ratios. There are 2 types of CBBCs: Bull contract and Bear contract.

The bull contract represents optimistic and the Bear contract represents pessimistic on a particular underlying. One key distinguishing feature of CBBC to warrants is that it has a call price and a Mandatory Call Feature. Investor can enjoy the gearing effect of changes in underlying price through a small amount of investment.