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MARKETS & INVESTING | Staff Reporter, Hong Kong
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1 in 2 investors worried over RMB currency risk: survey

Volatility risk of A-share markets scare them as well.

The Investor Education Centre (IEC) has published its survey on investors’ view and interest on mutual stock market access between Mainland China and Hong Kong (Mainland-Hong Kong Stock Connect).

According to a release from the IEC, a total of 1,056 adults were interviewed through an online survey from late October to early November 2016. The survey was conducted to better understand investors’ needs and identify knowledge gaps to tailor financial education initiatives for the public.

Whilst 83% of respondents have experience in Hong Kong stock investment, the majority had no experience trading in Mainland stocks. Though more than half of respondents are concerned about the volatility of renminbi and A-share markets, they noted that the existing Shanghai-Hong Kong Stock Connect, together with the upcoming Shenzhen-Hong Kong Stock Connect, would provide more opportunities to diversify their investment portfolios and risks.

Here's more from the IEC:

Professor Leonard Cheng, Chairman of the IEC said: “The capital markets of Hong Kong and the Mainland are getting more connected with the establishment of Shanghai-Hong Kong Stock Connect in 2014 and the upcoming Shenzhen-Hong Kong Stock Connect. While the trading links bring investment opportunity to investors, it is crucial to have a thorough understanding of the investment products, rules and regulations and investor protection, which differ from Hong Kong, to make informed decisions.”

The highlights of the survey findings are outlined below:

Advantages of investing in A-share markets: More than half of respondents (56%) agreed their investment portfolios and risks could be diversified, and 45% said more choices on different sectors were available on the Mainland. Respondents said they would be benefit with China’s economic growth (38%) and appreciation of renminbi (27%). Nearly one in four respondents (23%) expected to gain from short-term trading.

Major risks: More than half of respondents are concerned with renminbi currency risk (55%) and volatility risk of the A-share markets (51%). Other concerns included the differences in regulations and operations of the two markets (43%), corporate governance of the listed companies on the Mainland (37%) and that trading under Mainland-Hong Kong Stock Connect would not be covered by the Investor Compensation Fund of Hong Kong (32%).

Areas of interest: Respondents said they would like to know more about the financial performance of the listed companies (55%), trading rules and limitations (42%) of A-shares.

Key sectors: The top three sectors of the A-share market Hong Kong investors are interested in are high technology (41%), financial services (40%) and real estate (39%).

Financial products favoured: When asked if Mainland-Hong Kong Stock Connect could be extended to a wider range of Mainland investment products in the future, the top three products that respondents were interested in are initial public offerings (56%), exchange-traded funds (42%) and bonds (35%). More women indicated their interest in bonds than men.

“All investments come with risks,” said Professor Cheng. “We aim to provide impartial and useful information about the Mainland to build investors’ awareness and knowledge of new investment opportunities, so that they are equipped to assess their risk tolerance and manage expectations on returns. With better understanding of the various risk factors and opportunities, they can determine whether it is a suitable investment option.”

With the imminent launch of Shenzhen-Hong Kong Stock Connect, IEC’s financial education platform The Chin Family will organise a public education seminar on 26 November 2016 to enhance investors understanding of the Mainland-Hong Kong Stock Connect, and the opportunities and risks of A-share investments. Limited seats are available for enrollment on www.thechinfamily.hk on a first-come, first served basis. Video recording of the seminar will be available on the website for public review.  

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