Last Updated on June 2, 2022 by Steven
How to Invest in Hong Kong
Hong Kong is noted as one of the easiest tax zones in Asia, making it an ideal place to consider when thinking of investments. To start investing, you will need to understand the basics. Once these are clear, how to invest in Hong Kong becomes easier to navigate.
Where to invest money in Hong Kong
There are many places one can choose to invest money in Hong Kong. From stocks and bonds to businesses investments, you will never lack an area that’s most comfortable for you. Since people who seek to invest in Hong Kong have different preferences, here are a few options you could consider:
Environmental, Social, and Governance (ESG)
Conversations around making the world a better place have gone past an ideology state. From climate change to inclusivity, companies now spring up with ESGs in mind. The trend does not only aim to make humanity become a worthwhile species, but it’s also an opportunity for people to invest in like-minded societies and still profit financially.
In Hong Kong, investors are particularly getting more interested in climate change. If you seek to help change the world while growing financially, yet you do not have the means to fully commit to a personal project, then looking for a company or societies that are already on the move is a great opportunity. It’s all about putting your money where your consciousness and heart are.
Before you think about stocks and bonds, you need to understand how the industry works and the laws of the economy. Industry commodities are by far the best items that offer a practical guide towards this market. How demand and supply works will always affect when, where and what to invest in for the highest yields. You need a keen eye and some analytical skills. However, watching China’s domestic demand curves is not that challenging when you have the right investment aids.
If you do not want to over-risk your investments, Emerging-market bonds are among the safest options to go for. These bonds have combined clear rates and low spreads over the years, making them quite an attractive option. There’s much hope that some widening will still occur. Once you have a clear profile, your EM investments will be safe, making every coin set aside for this worthwhile.
If watching the cyclical turns of industrial commodities seem a bit tiresome or over involving, then investing in defensives might be a better option. This category involves technological innovations that arise as a means to solve a problem. A good example is a pharmaceutical industry, where many drug innovations arise to help treat stubborn diseases more effectively.
Equities and properties
In Hong Kong, a significant percentage of the land is owned by the government. This makes going the traditional property investment way a bit hard. However, it does not mean that one cannot yield anything from the market. With a tactical approach, there is a lot of hope for the Chinese equities. The 2018 pullback brought about a low valuation, resilient corporate fundamentals, and government stimulus worth looking into.
Starting a business in Hong Kong
It’s one thing to invest in the stock market and let the waves of economic factors determine how much you make, and a whole different story when you decide to launch a business. Although going the business way means you put in more time and have a solid business place, you will always have your business as an asset. Plus, the tax laws in Hong Kong encourage investors to consider starting their own companies or partner with local ones by buying company equities.
How to invest in the stock market in Hong Kong
There are many ways to invest in Hong Kong, but the stock market is the most direct way to participate from different parts of the world. However, ensure you cover some basics.
Here are terms you will come across often:
- Compound interest: This is where the snowball effect comes to play in investments. Your original invested amount (the principal) multiplies based on the profit interest. The longer your principle stays invested, the more you earn.
- Inflation: Due to different economic struggles, the value of a country’s currency could fall by a certain percentage. Therefore, it’s important to understand factors that contribute to inflation before deciding to invest in different currencies.
- Dollar-cost averaging: Since short-term market fluctuations shake one’s share price and make investments unstable, dollar-cost averaging provides a long-term strategy. You need to invest a certain amount regularly in a specific period which causes the shares buying price to even out.
- Understanding risks and returns: If you have been following how investments work, you’ve probably heard the saying that there are no tangible returns without significant risks. Some investors say that the higher the risk, the higher the returns. This is relatively true, depending on where you invest your money in Hong Kong. However, all investments have a certain risk percentage. Great investors know how to manage their risks for high returns.
- Risk diversification: Risks are not only unavoidable, but they are also sometimes unpredictable. This is why people who have been investing in stocks for a long time understand the benefit of having different portfolios. They use the principle of risk diversification. In simple terms, you could equate it to spreading your eggs in different baskets.
These are only a few of the terms you will come across occasionally when investing in the stock market in Hong Kong. The biggest mistake new investors make is approaching investment the same way one would if they are gambling.
How to invest in the Hong Kong stock exchange
Investing in the stock market could look like gambling from the outside, but the steps are more calculated in this case. HKEX (Hong Kong Exchange) offers over 2500 opportunities in terms of the number of companies listed. This makes it the largest stock exchange in Asia.
After merging with Futures Exchange in 2000, HKEX became a parent company. It then acquired the London Metal Exchange in 2012, making it a prestigious opportunity for companies to apply for initial public offerings.
The easiest way to enhance one’s portfolios is through international holdings. You can choose to directly invest in non-US assets, but in this case, a financial advisor will be the best aid. HKEX uses several indices for performance tracking. The best known is the Hang Seng Index that accumulates data from the top companies on the platform.
How to invest in the Hong Kong stock market from Canada
Investing in the Hong Kong stock market from Canada is best when done through either buying direct shares listed in the stock market or ETFs. For foreign companies to participate in the international stock market, including Hong Kong’s, they have to first register with the authorized Securities and Exchange Commission (SEC) to get their ADRs.
In general, using the now accessible online trading options makes it easier for anyone to invest in the Hong Kong Stock market from Canada. However, ensure you thoroughly research the brokerage firm you choose before approaching or investing any money with it. This will secure your money, so you don’t make too many losses before yielding.
How to invest in the Hong Kong stock market from the USA
If you want to invest in the Hong Kong stock market from the USA, ETFs have proven to be your best bet. Exchange-traded funds have better diversification opportunities while reducing currency risks. First Trust Hong Kong AlphaDEX Fund and iShares MSCI Hong Kong ETF are the most reliable ETFs you could opt for. The latter has been around for eight years, while the former is the oldest at 24 years.
Although ADRs are a direct way to invest in the Hong Kong stock market from the USA, their choices are limited. However, their shares bring direct ownership, while ETFs follow an indirect approach. To invest in the direct stock, you will need a brokerage firm licensed as an international trading platform.
If you prefer to work with Hong Kong brokerage firms to invest in the Hong Kong stock market from the USA, you must check that the financial institution is registered with the USA SEC. Unregistered firms cannot take US citizens as investing clients.
How to invest money in Hong Kong?
Investing money in Hong Kong is worth considering in terms of both business ownership and investing in HKEX. The stock exchange is stable enough and will continue getting more investors from the globe as China grows its IT and global markets communities. The only secret is ensuring you do thorough research from reliable and authorized sources before dipping in your toes.
Although considering price fluctuations is wise, you should, more importantly, look into a company’s economic standing and earnings. This is because any company can last inflation or troubled economic times if they can stabilize their profits. Generally, look into tax factors, compliances, and regulations plus cost and risks to get your best investment opportunity in Hong Kong.