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Hong Kong Stock Exchange

From Alfawiki
Stock Exchange of Hong Kong
Company typeSubsidiary
IndustryFinancial services
PredecessorAssociation of Stockbrokers in Hong Kong (1891), Hong Kong Stock Exchange (1914)
Founded1891
Headquarters
Hong Kong
,
Hong Kong
Area served
Asia, worldwide investors
OwnerHong Kong Exchanges and Clearing Limited (HKEX)
ParentHong Kong Exchanges and Clearing Limited (HKEX)

The Stock Exchange of Hong Kong (, SEHK, commonly referred to as the Hong Kong Stock Exchange) operates as a stock exchange headquartered in Hong Kong. As of August 2024, it stands as the largest exchange in Asia and ranks ninth worldwide by market capitalization.[1] Serving as a vital conduit for global investors to access Mainland China firms, the exchange supports substantial capital raising activities under Hong Kong’s unique regulatory environment, which provides enhanced opportunities for foreign investment.[2]

The exchange is owned by Hong Kong Exchanges and Clearing Limited (HKEX) through its subsidiary, Stock Exchange of Hong Kong Limited, and HKEX itself is listed on the exchange (). In 2021, HKEX overtook Chicago-based CME Group to become the world's largest bourse operator by market value. A survey conducted that year revealed that approximately 57% of adults in Hong Kong participate in stock market investments.[3] The traditional trading floor located at Exchange Square ceased operations in October 2017.[4]

History

The origins of Hong Kong’s securities market trace back to 1866, with the official stock market founded in 1891 under the Association of Stockbrokers in Hong Kong. Established to oversee speculative activities, its inaugural chairman was Mr Vernon, accompanied by members such as E Jones Hughes and William Legge. The entity was renamed The Hong Kong Stock Exchange in 1914.

By 1972, the city hosted four separate stock exchanges, leading to calls for consolidation. This resulted in the incorporation of the Stock Exchange of Hong Kong Limited in 1980, which began operations on 2 April 1986. The market crash of 1987 revealed structural weaknesses that prompted regulatory overhauls, culminating in the establishment of the Securities and Futures Commission (SFC) in 1989 as the unified market regulator.

Enhancements to market infrastructure included launching the Central Clearing and Settlement System (CCASS) in June 1992 and introducing the Automatic Order Matching and Execution System (AMS) in November 1993. Continuous updates to regulations and rules have sought to strengthen investor safeguards and respond to shifting market demands. Notable system improvements featured off-floor trading terminals installed at brokerage offices (1996) and AMS/3 implementation in 2000, enabling straight-through processing.

Significant product milestones encompassed listing the first derivative warrant in February 1988, welcoming the initial China-incorporated company (H share) with Tsingtao Brewery in June 1993, instituting regulated short selling from January 1994, and launching stock options in September 1995. The Growth Enterprise Market (GEM), introduced in November 1999, focuses on capital raising for emerging companies across various sectors, fostering growth particularly within technology industries.

In March 1999, a restructuring initiative combined the Exchange, the Hong Kong Futures Exchange, and their clearinghouses into a single holding entity named Hong Kong Exchanges and Clearing Limited.

Concise timeline

  • On 2 April 1986, a newly established trading hall commenced operations, listing 249 companies with a combined market capitalization of HK$245 billion.
  • The Stock Exchange officially inaugurated its grand opening on 6 October 1986.
  • To mitigate losses during the Black Monday global market crash, the exchange suspended trading for four days in October 1987.
  • The Ian Hay Davison Report released in May 1988 examined pre-closure procedures, leading to substantial reforms in the market over the following years.
  • The Central Clearing and Settlement System (CCASS) was introduced on 24 June 1992.
  • Tsingtao Brewery became the first Chinese company to list H shares on the exchange on 15 July 1993.
  • The Automatic Order Matching and Execution System AMS/1 was launched on 1 November 1993; AMS/2 followed in January 1996, allowing trading beyond the physical floor.
  • Amid the Asian financial crisis, the government-supported Tracker Fund of Hong Kong was initiated on 12 November 1999.
  • The newly formed Growth Enterprise Market (GEM) saw its first two company listings on 25 November 1999.
  • On 6 March 2000, the Stock Exchange, Futures Exchange, and Securities Clearing Company were consolidated as wholly owned subsidiaries under HKEx, which itself went public on 27 June 2000.
  • AMS/3 was rolled out on 23 October 2000.
  • The Trading Hall underwent refurbishment and was renamed the Exchange Trading and Exhibition Hall Complex on 16 January 2006, reducing available trading floor space by more than half.
  • A cutting-edge Data Centre was inaugurated by HKEx in Tseung Kwan O on 31 January 2013.
  • Due to a surge in electronic trading, the physical floor trading lobby closed on 27 October 2017; by 2014, it accounted for less than one percent of total trade volume. The space was repurposed as Hong Kong Connect Hall in February 2018 to host conferences and listing ceremonies.
  • On 19 July 2023, the Hong Kong Dollar (HKD)-Renminbi (RMB) Dual Counter Model was introduced, enabling shares to be traded interchangeably between HKD and RMB counters. This initiative aimed to improve liquidity and minimize price differences across counters.

source: HK Ex

Historical development and predecessors

Association of Stockbrokers in Hong Kong (Established in 1891)
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Renamed Hong Kong Stock Exchange in (1914)
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Post-World War II merger in (1947), retaining the Hong Kong Stock Exchange title
Hong Kong Stockbrokers Association (Founded in 1921)
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Hong Kong Stockholders Association (Formed in 1956), promoting information exchange between HKSE and other stock exchanges
Far East Exchange Ltd (Established in 1969) Kam Ngan Stock Exchange Ltd (Founded in 1971) Kowloon Stock Exchange Ltd (Founded in 1972)
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In (1986), HKSE merged with other exchanges to form the unified Stock Exchange of Hong Kong
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In (2000), Hong Kong Exchanges and Clearing became the holding entity for the Hong Kong Stock Exchange
Hong Kong Futures Exchange Ltd (Founded in 1976) Hong Kong Securities Clearing Company Ltd (Established in 1989)


Trading hours

The trading schedule consists of the following segments:

  • A pre-market auction running from 9:00 am until 9:30 am, with the opening prices announced shortly after 9:20 am.
  • Continuous trading in the morning session from 9:30 am to 12:00 pm.
  • An extended morning period, often referred to as the lunch break, lasting from 12:00 pm to 1:00 pm, during which only selected securities remain actively traded.
  • Afternoon continuous trading occurring between 1:00 pm and 4:00 pm.

The closing price is determined by taking the median of five price snapshots recorded every 15 seconds during the final minute, between 3:59 and 4:00 pm. Although a closing auction was introduced in May 2008, it was discontinued in March 2009 due to concerns over market volatility and potential price manipulation.

Before reforms enacted in 2011, the exchange observed an unusually long two-hour midday break, the longest among leading global markets. Efforts to reduce this interval encountered opposition from brokers and other market participants. In March 2011, adjustments were made to lengthen overall trading hours by shortening the lunch break and commencing index futures and options trading earlier. By March 2012, the lunch break was further shortened to one hour, bringing Hong Kong’s trading hours more in line with those of mainland China.

Electronic trading

A computerized trading platform was first implemented on April 2, 1986. Subsequently, in 1993, the exchange launched its "Automatic Order Matching and Execution System" (AMS), which underwent a major upgrade to AMS/3 in October 2000.

Regulatory role

Since 2003, independent non-executive director David Webb has advocated for establishing a separate regulatory body to address the inherent conflict between the Exchange’s commercial objectives and its regulatory responsibilities. He also promotes stronger investor representation within the Hong Kong Stock Exchange governance structure.

In 2007, protests by small-scale local brokers compelled the board to retract a proposal aimed at tightening minimum trading spreads for equities and warrants priced between HK$0.25 and HK$2. Webb criticized the board for capitulating to entrenched interests.

Twenty largest stocks by market capitalisation

Source: HKEX, figures in billions of Hong Kong dollars, data as of 14 February 2018

  1. Tencent Holdings: $4,118.93
  2. Industrial and Commercial Bank of China: $2,877.98
  3. China Construction Bank: $2,167.39
  4. Bank of China: $1,803.12
  5. PetroChina: $1,715.53
  6. Agricultural Bank of China: $1,641.43
  7. HSBC Holdings: $1,629.79
  8. Ping An Insurance: $1,547.81
  9. China Mobile: $1,509.04
  10. China Merchants Bank: $991.75
  11. Bank of Communications: $985.55
  12. China Life Insurance Company: $844.57
  13. Postal Savings Bank of China: $676.41
  14. China National Offshore Oil Corporation: $492.91
  15. China Minsheng Bank: $420.11
  16. BOC Hong Kong (Holdings): $412.34
  17. China Pacific Insurance Company: $404.37
  18. CK Hutchison Holdings: $377.47
  19. CITIC Bank International: $367.82

See also

External links

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