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The Stock Exchange of Hong Kong (SEHK, also known as Hong Kong Stock Exchange) is a
stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for th ...
based in Hong Kong. As of the end of 2020, it has 2,538 listed companies with a combined market capitalization of HK$47 trillion. It is reported as the fastest growing stock exchange in Asia. The stock exchange is owned (through its subsidiary Stock Exchange of Hong Kong Limited) by Hong Kong Exchanges and Clearing Limited (HKEX), a holding company that it also lists () and that in 2021 became world's largest bourse operator in terms of
market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by t ...
, surpassing Chicago-based CME. The physical trading floor at Exchange Square was closed in October 2017.


History

The Hong Kong securities market can be traced back to 1866, but the stock market was formally set up in 1891, when the Association of Stockbrokers in Hong Kong was established. It was renamed as The Hong Kong Stock Exchange in 1914. By 1972, Hong Kong had four stock exchanges in operation. There were subsequent calls for the formation of a unified stock exchange. The Stock Exchange of Hong Kong Limited was incorporated in 1980 and trading on the exchange finally commenced on 2 April 1986. Since 1986, a number of major developments have taken place. The 1987 market crash revealed flaws in the market and led to calls for a complete reform of the Hong Kong securities industry. This led to significant regulatory changes and infrastructural developments. As a result, the
Securities and Futures Commission The Securities and Futures Commission (SFC) of Hong Kong is the independent statutory body charged with regulating the securities and futures markets in Hong Kong. The SFC is responsible for fostering an orderly securities and futures market ...
(SFC) was set up in 1989 as the single statutory securities market regulator. The market infrastructure was much improved with the introduction by the exchange of the Central Clearing and Settlement System (CCASS) in June 1992 and the Automatic Order Matching and Execution System (AMS) in November 1993. Since then, the framework of market rules and regulations, both exchange-administered or otherwise, have been undergoing continuing review and revision to meet changing market needs while ensuring effective market regulation. The Exchange Listing Rules have been made more comprehensive, and other existing regulations have been improved or new regulations introduced to enhance market development and investor protection. Enhancements were also made to the system infrastructure, including the launch of off-floor trading terminals in brokers' offices in January 1996. The third generation of the trading system, AMS/3, will be launched in 2000. It will provide enhanced functionality and a platform for a straight-through transaction process. In respect of market and product development, there is the listing of the first derivative warrant in February 1988, the listing of the first China-incorporated enterprise (H share) in July 1993; and the introduction of regulated short selling in January 1994 and stock options in September 1995. Furthermore, the exchange introduced the Growth Enterprise Market (GEM) in November 1999 to provide fundraising opportunities for growth companies of all sizes from all industries, and to promote the development of technology industries in the region. According to the reform plan announced in March 1999, the Exchange, the Hong Kong Futures Exchange and their clearinghouses merged into a new holding company, the Hong Kong Exchanges and Clearing Limited.


Brief chronology

* On 2 April 1986, a new trading hall opened. At that time, a total of 249 companies were listed on the Exchange, total market capitalisation was HK$245 billion. * 6 October 1986: Stock Exchange grand opening. * October 1987: The Stock Exchange is closed for four days in an attempt to stop losses during Black Monday global equities market crash * May 1988: The
Ian Hay Davison Ian Frederic Hay Davison (1931–2022) was an accountant, chairman, executive and bell ringer. He was the chief executive of Lloyd's of London from 1982 and helped to reform the insurer. In 1988, he led a report on the management and operatio ...
Report, commissioned to investigate practices on the exchange in the lead-up to its closure, is released, resulting in significant market reforms - although many took years to finally implement * On 24 June 1992, the Central Clearing and Settlement System (CCASS) is introduced * On 15 July 1993, in the Tsingtao Brewery became the first Chinese enterprise to list its H shares on the exchange. * On 1 November 1993, a new "Automatic Order Matching and Execution System", AMS/1, was introduced on the exchange; later, in January 1996, the second phase AMS/2 was introduced, becoming the basis of off-floor trading. * On 12 November 1999, the Tracker Fund of Hong Kong, created by government intervention during the
1997 Asian financial crisis The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1 ...
, had its introduction on the exchange. * 25 November 1999, two companies were jointly listed on the newly created Growth Enterprise Market (GEM) * On 6 March 2000, The Stock Exchange, Futures Exchange, and Hong Kong Securities Clearing Company all became wholly owned subsidiaries of HKEx, which was in turn listed on 27 June 2000. * On 23 October 2000, AMS/3 was implemented on the exchange. * On 27 October 2017, the floor trading lobby was closed due to the shift towards electronic trading. By 2014, the venue accounted for less than 1% of trade volume. The trading hall was renamed to Hong Kong Connect Hall and will be redeveloped as a museum, conference, and exhibition space to showcase Hong Kong's financial markets. ''source: HK Ex''


Exchange history and predecessors


Trading hours

The trading day consists of: *A pre-opening auction session from 9:00 am to 9:30 am. The opening price of a security is reported shortly after 9:20 am. *A morning continuous trading session from 09:30 am to 12:00 pm. *An extended morning session from 12:00 noon to 1:00 pm, also referred to as the lunch break. Continuous trading proceeds in specifically designated securities (currently two ETFs, 4362 and 4363). Trading in other securities is not possible. However, previously placed orders in any securities can be cancelled from 1:00 pm onwards. *An afternoon continuous trading session from 1:00 pm to 4:00 pm. The closing price is reported as the median of five price snapshots taken from 3:59 to 4:00 pm every 15 seconds. In May 2008, the exchange also implemented a closing auction session to run from 4:00 pm to 4:10 pm, with a similar pricing mechanism as the opening auction; however, this resulted in significant fluctuations in the closing prices of stocks and suspicions of market manipulation. Initially, the exchange proposed limiting price fluctuations in the auction sessions to 2%; in the end, they removed the closing session entirely in March 2009. Up until 2011, trading hours comprised a pre-opening auction from 9:30 AM to 9:50 AM, followed by continuous trading from 10:00 AM to 12:30 PM and 2:30 PM to 4:00 PM. The two-hour lunch break between the morning and afternoon sessions was the longest among the world's 20 major stock exchanges. A 2003 proposal to shorten the lunch break failed due to opposition from brokers. Another plan to shorten the lunch break to one hour was floated by the exchange in 2010; the morning session would then start earlier, run from 9:30 am to 12:00 pm, and the afternoon session from 1:00 pm to 4:00 pm, leaving the closing time the same as before. Justifications included bringing hours into line with China. Reactions from both brokers and the restaurant industry were mixed. On 7 March 2011, the exchange extended its hours in the first of two phases. The morning session now ran from 9:30 am to 12:00 noon, followed by a ninety-minute lunch break, and an afternoon session from 1:30 pm to 4:00 pm. Index futures and options now began trading at 9:15 am, thirty minutes earlier than before, and closed at the same time as before, 4:15 pm. On 5 March 2012, the lunch break was cut to sixty minutes, with the afternoon session running from 1:00 pm to 4:00 pm.


Electronic trading

The exchange first introduced a computer-assisted trading system on 2 April 1986. In 1993 the exchange launched the "Automatic Order Matching and Execution System" (AMS), which was replaced by the third generation system (AMS/3) in October 2000.


Regulatory role

David Webb, independent non-executive director of the Exchange since 2003, has been arguing for a super regulatory authority to assume that role as regulator, as there is an inherent conflict between its commercial and regulatory roles. In the meantime, he argues for improved investor representation on the Hong Kong Stock Exchange. In 2007, the uproar by smaller local stockbrokers over the decision by board of directors to cut minimum trading spreads for equities and
warrants Warrant may refer to: * Warrant (law), a form of specific authorization ** Arrest warrant, authorizing the arrest and detention of an individual ** Search warrant, a court order issued that authorizes law enforcement to conduct a search for eviden ...
trading at between 25 HK cents and HK$2 caused the new board to vote to reverse the decision. The reforms were to be implemented in the first quarter, but was put back on the table following protests by brokers. Webb criticised the board for caving in to vested interests.


Trading characteristics

* It is perfectly normal for Hong Kong stocks of even well-known companies to trade at prices that correspond to less than HK$4 a share. A Hong Kong stock would not be considered a penny stock unless its price was less than about HK$0.50. *Each stock has its own individual board lot size (an online broker will usually display this along with the stock price when you get a quote); purchases in amounts that are not multiples of the board lot size are done in a separate "odd lot market". *There is a close-in-price rule for limit orders, which must be within 24 ticks of the current price. Individual brokers may impose an even stricter rule; for instance,
HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...
requires limit orders to be within 10 ticks of the current price. Broker support for triggered order types such as market-if-touched orders would allow placing orders further away, which would be sent to the exchange when the price condition was established.


Twenty largest stocks by market capitalisation

''Source: HKEX, in billions of Hong Kong dollars, Data updated on 14 February 2018'' # AIA: $6,764.32 # Tencent Holdings: $4,118.93 #
Industrial and Commercial Bank of China Industrial and Commercial Bank of China Limited (ICBC; ) is a Chinese multinational bank. Founded as a limited company on 1 January 1984, ICBC is a state-owned commercial bank. With capital provided by the Ministry of Finance of China, the ...
: $2,877.98 # China Construction Bank: $2,167.39 # Bank of China: $1,803.12 #
PetroChina PetroChina Company Limited () is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation (CNPC), headquartered in Dongcheng District, Beijing. The company is currently Asia's largest oil and gas pr ...
: $1,715.53 # Agricultural Bank of China: $1,641.43 # HSBC Holdings: $1,629.79 # Ping An Insurance: $1,547.81 # China Mobile: $1,509.04 # China Merchants Bank: $991.75 # Bank of Communications: $985.55 # China Life Insurance Company: $844.57 #
Postal Savings Bank of China Postal Savings Bank of China Co., Ltd. also known as PSBC is a commercial retail bank founded in 2007 and headquartered in Beijing. It provides basic financial services, especially to small and medium enterprises, rural and low income custo ...
: $676.41 #
China National Offshore Oil Corporation China National Offshore Oil Corporation, or CNOOC Group (Chinese: 中国海洋石油总公司 Pinyin: ''Zhōngguó Háiyáng Shíyóu Zǒnggōngsī''), is one of the largest national oil companies in China, and the third-largest national oil c ...
: $492.91 #
China Minsheng Bank China Minsheng Bank (), founded on January 12, 1996, in Beijing, is the first bank in China to be owned mostly by private sector enterprises. The bank was founded by Jing Shuping, a Chinese lawyer and businessman. Minsheng Bank is well known fo ...
: $420.11 # BOC Hong Kong (Holdings): $412.34 # China Pacific Insurance Company: $404.37 # CK Hutchison Holdings: $377.47 # CITIC Bank International: $367.82


See also

* A-share (mainland China) *
Shanghai Stock Exchange The Shanghai Stock Exchange (SSE) is a stock exchange based in the city of Shanghai, China. It is one of the three stock exchanges operating independently in mainland China, the others being the Beijing Stock Exchange and the Shenzhen Stock Exc ...
* H share *
Hang Seng Index The Hang Seng Index (HSI) is a freefloat-adjusted market- capitalization-weighted stock-market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator ...
*
Leading stock Leading stock (龍頭股 / 龙头股), which is usually applied to the stock market of Mainland China and Hong Kong, means stock of a certain company which has leading status in their business field, including scope, market share, market capi ...
* List of East Asian stock exchanges *
Stock disasters in Hong Kong A number of stock market crashes have occurred in the Hong Kong stock market since the 1960s: 1960s * Stock disaster in 1965 ( Canton Trust Bank run) * Stock disaster in 1967 (Hong Kong 1967 Leftist riots) 1970s * Stock disaster in 1973 ( 1973 ...


References


External links

* {{authority control, state=expanded Financial services companies established in 1891 Finance in Hong Kong 1891 establishments in Hong Kong Stock exchanges in Hong Kong