1.1 The objective of this survey is to collect information on (a) the investment behaviour of retail investors, (b) how they manage and safeguard their investments, (c) their awareness and understanding of the work of the Securities and Futures Commission (SFC).

1.2 The target respondents were adults of age 18 or over who had traded any ' risk ' investment products in the past three years (referred to as retail investors hereafter). ' Risk ' investment products include Hong Kong stocks, derivatives listed in Hong Kong, stocks and derivatives listed in the Mainland and foreign markets, funds (including investment-linked insurance schemes), leveraged forex contracts (excluding fixed deposits of foreign currencies at banks) and bonds.

1.3 A random sample of 2,069 adults was interviewed by telephone. The sample was selected by a two-stage random process. In the first stage, a random sample of telephone numbers proportionally allocated to the 18 District Board districts was selected in accordance with the sizes of their adult population. In the second stage, telephone calls were made to the selected households and an adult of age 18 or over was randomly selected for interview.

1.4 Of the 2,069 adults successfully interviewed, 417 were retail investors. In order to have a larger sample of retail investors to facilitate meaningful analyses, an additional random sample of adults was subsequently interviewed from which 204 retail investors were identified and interviewed by telephone. Altogether there were 621 retail investors successfully interviewed in the survey.

1.5 For tables presented in this report, figures may not add up to totals due to rounding.

2.1 The majority of the general public had heard of Hong Kong stocks (93%). Comparatively fewer had heard of bonds (75%), derivatives listed in Hong Kong (68%), funds including investment-linked insurance schemes (65%), leveraged forex contracts (63%), and stocks and derivatives listed in the Mainland and foreign markets (57%).

Table 2.1 Public awareness of risk investment products

2.2 As regards respondents' history and plan of trading risk investment products, 26% had ever traded these products, 20% had traded in the past three years and 14% in the past 12 months. 19% would trade in the coming 12 months and 17% were currently holding risk investment products.

3.1 59% of retail investors were male (cf. 48% for non-retail investors).

3.2 19% were of age 18 to 29, 65% of age 30 to 49, 12% of age 50 to 59 and 5% of age 60 or over (cf. 23%, 43%, 12% and 22% respectively for non-retail investors).

3.3 35% had attained upper secondary education and 41% an even higher education level (cf. 27% and 17% respectively for non-retail investors).

3.4 (a) 76% were engaged in full-time employment (cf. 46% for non-retail investors). They were mainly managers and administrators (15%), professionals (10%), associate professionals (18%) and clerks (11%) (cf. 3%, 3%, 8% and 9% respectively for non-retail investors).

(b) 14% were homemakers, 4% retirees, 4% unemployed persons and 1% students (cf. 21%, 20%, 6% and 6% respectively for non-retail investors).

Value of risk investment products held

4.1 While 24% of retail investors did not hold any product currently, 19% reported a holding valued at HK$40,000 or less, 19% HK$40,001 to HK$100,000, 26% HK$100,001 to HK$500,000 and 9% more than HK$500,000.

Table 4.1 Value of risk investment products held

Transactions made in past 12 months

4.2 As regards the frequency of trading risk investment products, 24% of the retail investors had made one to four transactions in the past 12 months when buying and selling were counted as two transactions, 22% had made five to ten transactions and 23% more than ten transactions. The median number of transactions was eight. Note that there was 31% of retail investors who had not made any trading in the past 12 months.

4.3 26% reported that the usual value of each transaction was less than HK$50,000, 18% HK$50,000 to HK$99,999 and 18% more than HK$100,000. Note that 37% of retail investors said that there was no fixed pattern.

Table 4.3 Usual value of each transaction

Types of brokers used

4.4 46% of retail investors traded through bank-affiliated brokers, another 46% brokerage firms and 8% both.

Table 4.4   Types of brokers used

Stock trading

4.5 (a) 91% of retail investors had traded Hong Kong stocks in the past three years.

(b) Among those investors, most of them (64%) had only cash accounts for trading stocks and a small proportion (2%) had only margin accounts. 6% had both cash accounts and margin accounts but most of them (68%) usually traded stocks through their cash accounts. A considerable proportion (28%) did not know whether they had a cash account or margin account with their brokers.

Table 4.5(b)   Whether respondents had cash accounts or margin accounts for trading stocks

Table 4.5(b)(cont'd)  Types of accounts used

4.6 50% of the stock investors had their shares under custody of their brokers or bank-affiliated brokers. Among these investors, only 35% said they had received annual reports of the listed companies which they had shareholdings from their brokers, 65% said they had not.

4.7 46% of the stock investors registered their shares in their own names. 4% did not know what arrangement was in place.

Table 4.6 - 4.7  Registration of shares

 

4.8 56% of the stock investors expressed that they wished to have a copy of the annual reports of those listed companies which they had shareholdings.

Table 4.8 Whether respondents wished to have a copy of annual report of those listed companies which they had shareholdings

4.9 1% of retail investors had traded through the Internet.

4.10 8% of retail investors said that they would definitely or very likely trade through the Internet in the coming 12 months.

5.1 47% of retail investors considered that they had properly safeguarded their rights when making investments.

Table 5.1 Whether respondents considered that they had properly safeguarded their rights when making investments

5.2 9% thought otherwise and they thought they " had not obtained adequate professional advice " (29%), " had not clarified the contract notes and/or confirmation of the transactions " (26%), " did not know clearly the risk of the investments " (24%) and " did not have thorough understanding of the stocks or funds invested " (21%).

5.3 With respect to the efforts made to safeguard their rights when making investments, most of the retail investors had -

(a) considered the level of risk that they were able to take before deciding to make any investment (91%);

(b) read thoroughly the contract notes and account statements to ensure the information in these documents was accurate (91%);

(c) stated clearly the price and amount of the investment products to be bought before placing their dealing order (85%);

(d) studied the information about the listed companies or funds before deciding to make any investment (77%); and

(e) asked for a copy of the written agreement signed with their brokers or investment advisers (69%).

5.4 About half compared the commissions and fees charged by different brokers or investment advisers before they dealt with them (48%), and read thoroughly the agreement signed with their brokers or investment advisers (47%).

5.5 Much fewer checked whether their brokers or investment advisers were licensed by the SFC (32%), sought advice from their brokers or investment advisers before deciding to make any investment (29%), knew where their brokers or investment advisers held their money and investments (23%), and knew whether the funds they invested in were authorised by the SFC (19%).

Table 5.3 ¡V 5.5 Whether respondents had made efforts to safeguard their rights when making investments

Knowledge of regulatory roles

6.1 The majority (96%) of retail investors had heard of the SFC.

6.2 A number of regulatory work were read out to retail investors. They were asked whether there were organisations in Hong Kong responsible for executing each of these work and if yes, which organisations. The findings show that most of the retail investors knew that there was an organisation in Hong Kong responsible for these work and most of them said that the SFC was the organisation responsible for executing the work.

6.3 Retail investors were subsequently informed that the SFC was ultimately responsible for the market although it may not be the executing organisation of the work.

6.4 When asked whether there were any aspects of supervision work that should be strengthened or added so as to provide sufficient protection to investors and to increase their confidence in investing in the local securities and futures market, 57% answered in the positive and they mainly suggested " improving the transparency of listed companies " (36%) and strengthening the " enforcement of measures against insider dealing " (35%), " supervision of the conduct of brokerage firms " (22%) and " enforcement of measures against market manipulation " (17%).

Views on market

6.5 14% of retail investors thought that there were unfairness in some aspects of the securities and futures market of Hong Kong. These aspects included " practices of insider dealing" ¡¨ (23%), " market manipulation by large investors " (20%), " limited access to information for small investors " (16%), and " insufficient market transparency " (14%).

7.1 Those retail investors who had a margin account for trading stocks were asked whether they considered that the proposed regulation on share margin financing activities could increase investors ' confidence in investing in the local securities market and whether they would participate more in margin trading if the proposal was passed.

1. 82% considered that the proposal could increase investors ' confidence in investing in the local securities market. 10% said that investors ' confidence would be the same and 9% did not have any comment.

2. 28% said that they definitely or very likely would participate more in margin trading if the proposal was put into practice.

Table 7.1 Whether the proposed regulation on share margin financing activities could increase investors ' confidence in investing in the local securities market

7.2 Those who did not have a margin account were asked whether they would open a margin account for trading stocks if the proposed regulation was put into practice. Only 4% said that they definitely or very likely would.

Table 7.2 Likelihood to open a margin account for trading if the proposed regulation on share margin financing activities was passed

8.1 92% of retail investors were aware that the SFC had carried out investor education work through various channels.

8.2 A number of investor education work that the SFC had carried out in the past 12 months were read out to retail investors who were then asked whether they had seen or heard of each of these work. The results show that 77% of the retail investors were aware of the television, radio announcements and poster campaigns. The awareness level varied from 11% to 48% for the other education work.

Table 8.2 Awareness of investor education work carried out by SFC in the past 12 months

8.3 Among these retail investors who were aware of the respective investor education work, a large proportion (78% to 90%) thought that these work had helped enhance investors ' understanding of the regulatory framework of the securities and futures markets and investors ' rights and responsibilities.

Table 8.3 Perceived effectiveness of investor education work in helping investors understand the regulatory framework of the securities and futures markets and their rights and responsibilities