7. online traders - hong kong stock exchange...• compared to non-online stock traders, online...

RETAIL INVESTOR SURVEY 2005 20

7. ONLINE TRADERS

7.1 Incidence and proportion of online stock traders and online derivatives traders

• Online stock traders have accounted for more than 30% of all stock traders since 2003 and reached 38.5% in 2005. Online derivatives traders also rose to 37.5% of all derivatives traders in 2005.

• Compared to stock-only stock traders, a larger proportion of stock-and-derivatives stock traders were online traders (56% vs 37%).

• The proportion of online stock traders who traded online all the time or most of the time remained similar to 2004 (75% vs 78%).

• The proportion of online derivatives traders who traded online all the time or most of the time increased from 66% in 2004 to 90% in 2005.

Note: It should be noted that the findings on derivatives investors are subject to relatively large error due to the small size of the sample of derivatives investors in the survey. Due to the terminology used in the survey questionnaire, some derivatives investors might have responded to certain questions based on their perceptions of the derivative warrants market. Therefore, caution is needed in interpreting the findings on derivatives investors.

Figure 16. Trend of online stock traders and online derivatives traders (2000 - 2005)

35.8%30.1%

44.2%

18.1%

7.0%

38.5%

29.9%

26.1%

29.3%

37.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Nov 2000* Dec 2001* Dec 2002 Dec 2003 Oct 2004 Dec 2005

Online stock traders as percentage of all stock traders

Online derivatives traders as percentage of all derivatives traders

* Proportions of all stock investors (ie including non-trading stock investors) who had used online trading (in the past 12 months for 2000 and in the past for 2001).


Figure 17. Online stock traders as percentage of stock traders by type (2005)

56.4%

36.7%38.5%

0%

10%

20%

30%

40%

50%

60%

All stock traders Stock-only stock traders Stock-and-derivatives stock traders

Figure 18. Usage of online stock trading among online stock traders (2000 - 2005)

30%

60% 55%65%

49%

26%

16% 26%13%

26%12%

12%15%

15% 17%33%

12%4% 7% 8%

26%

74%

0%

20%

40%

60%

80%

100%

Nov 2000 Dec 2001* Dec 2002 Dec 2003 Oct 2004 Dec 2005

All the time Most of the time Half of the time Seldom

Some of the time

* Usage of online trading among all stock investors who had used online trading in the past. Note: Numbers may not add up to 100% due to rounding.


Figure 19. Usage of online derivatives trading among online derivatives traders

(2002 - 2005)

66%55% 60% 58%

11%22% 6%

32%

20% 23%

22%

5%5%

12%5%

0%

20%

40%

60%

80%

100%

Dec 2002 Dec 2003 Oct 2004 Dec 2005

All the time Most of the time Half of the time Seldom Note: Numbers may not add up to 100% due to rounding.

7.2 Profile and trading pattern of online stock traders and online derivatives traders

• A typical online stock trader was a 42-year-old white-collar worker, with tertiary or above education, a monthly personal income of about HK$22,500 and a monthly household income of about HK$45,000.

• Compared with non-online stock traders, online stock traders comprised a larger proportion of individuals with higher education level, higher work status, higher monthly personal income and higher monthly household income.

• Compared to non-online stock traders, online stock traders were more active in stock trading in terms of both frequency (a median of 10 transactions vs 6) and average deal size (a median of HK$50,000 vs HK$40,000). In aggregate, online stock traders contributed 48% of total retail stock trading.8

• Compared to non-online derivatives traders, online derivatives traders tended to trade more frequently (a median of 10 transactions vs 5) and with a larger average deal size (a median of 4 contracts vs 2). In aggregate, online derivatives traders contributed 72% of total retail derivatives trading.9

Note: The sample obtained on online derivatives traders was too small to produce inferential statistics on their profile.

8 It must be borne in mind that not all stock trading by online stock traders was done online. 9 It must be borne in mind that not all derivatives trading by online derivatives traders was done online.


Table 9. Profile of online and non-online stock traders (2005)

Online stock traders

(%)

Stock investors

Stock traders

Non- online stock

traders Dec 03 Oct 04 Dec 05

Sex

Male 55.1 56.4 52.1 68 64.6 63.3 Female 45.0 43.6 48.0 32 35.4 36.7 Age

18 – 19 0.3 0.4 0.5 - - 0.2 20 – 29 10.9 11.6 8.8 13.4 13.9 16.2 30 – 39 25.7 25.7 22.6 47.7 40.1 30.6 40 – 49 31.5 32.0 29.4 19 34.9 36.0 50 – 59 20.6 19.6 24.4 14.6 8 11.8 60 or over 11.1 10.8 14.3 5.4 3.1 5.2 Median 42 42 47 37 37 42

Education level

No schooling / kindergarten 1.2 0.8 1.2 - - - Primary 7.0 6.5 9.2 2.7 3.4 2.2 Lower secondary 13.7 12.2 15.5 12.2 10.6 7.0 Upper secondary 29.4 29.3 29.6 21.5 23.8 28.7 Matriculation 7.5 8.1 8.2 5.5 5.5 7.9 Tertiary or above 40.7 42.6 35.4 58 56.7 54.3 Refusals 0.5 0.6 0.9 - - -

Occupation

Managers / administrators / professionals 23.7 24.6 20.5 33.5 36.4 31.0 White collar 30.1 32.1 29.4 33.5 31.8 36.3 Blue collar 15.0 13.9 15.7 12.3 11.3 11.0 Homemakers 12.0 10.5 12.9 8.4 8.8 6.7 Retirees 11.4 11.3 13.9 6.7 4.5 7.0 Students 0.6 0.7 0.8 - 0.4 0.7 Unemployed persons 3.5 3.5 3.6 2.8 1.7 3.4 Others 0.0 0.0 0.0 - 0.4 0.0 Refusals 3.7 3.4 3.2 2.8 4.7 3.8 Median monthly personal income (HK$) * 18,750 18,750 16,250 22,500 22,500 22,500 Median monthly household income(HK$) 35,000 35,000 35,000 35,000 35,000 45,000

* Among those who were engaged in full-time or part-time employment. Note: Numbers may not add up to 100% due to rounding.


Figure 20. Number of stock transactions in the past 12 months by online stock traders (2002 - 2005)

13% 19%12% 10%

24%12%

11%14% 16%

18%11%16%

10% 9%

10%20%15%

18% 16%

17%

44% 39%46% 49%

31%

0%

20%

40%

60%

80%

100%

Dec 2002 Dec 2003 Oct 2004 Dec 2005 Dec 2005

1 - 2 3 - 4 5 - 6 7 - 10 More than 10

Online stock traders Non-online stock traders

Online stock traders Non-online stock traders


Median 10 10 10 10 6

Note: Numbers may not add up to 100% due to rounding.

Figure 21. Average value per stock transaction in the past 12 months by online and non-online stock traders (2005)

17%

24%

29% 26% 31%

29%

35% 39% 32%

19%23% 22% 23%

9% 11% 10% 12%

2%2%2%2%

0%

20%

40%

60%

80%

100%

All stock investors All stock traders Online stock traders Non-online stock traders

Nil HK$20,000 or less HK$20,001 - HK$50,000 HK$50,001 - HK$100,000 More than HK$100,000 Refusal


Median (HK$) 30,000 40,000 50,000 40,000

Notes: Numbers may not add up to 100% due to rounding. Excluding outliers.


Figure 22. Implied total transaction value in the past 12 months by online and non-online stock traders (2005)

24%

29%19%

35%

9%

11%

12%

11%

15%

18%22%

16%

11%13%

12%

14%

14%17%

20%15%

8% 9% 12% 7%

17%

2%2%2%2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Nil HK$100,000 or below HK$100,001 - HK$200,000 HK$200,001 - HK$500,000

HK$500,001 - HK$1,000,000 HK$1,000,001 - HK$5,000,000 Over HK$5,000,000 Refusals


Median (HK$) 200,000 340,000 400,000 250,000 Aggregate value as % of total 100% 100% 48% 52%

Notes: Numbers may not add up to 100% due to rounding. Excluding outliers.

Figure 23. Number of derivatives transactions in the past 12 months by online derivatives traders (2002 - 2005)

24%16%

6% 10%21%

19%

7%

11%10%

26%

19%

31%

18%

14%

16%

23%

26%

8%

38%31%

60%

36% 32%

0%

20%

40%

60%

80%

100%


1 - 2 3 - 4 5 - 6 7 - 10 More than 10

Non-online derivatives traders

Online derivatives traders

Online derivatives traders Non-online

derivatives traders


Median 6 6 12 10 5



Figure 24. Average contract volume per derivatives transaction in the past 12 months by online and non-online derivatives traders (2005)

42%

27%

52%

18%

21%

16%9%

9%

8%19%

29%

12%

7% 12%4%

8%2%

6%

0%

20%

40%

60%

80%

100%

All derivatives traders Online derivatives traders Non-online derivatives traders

1 - 2 3 - 4 5 - 6 7 - 10 More than 10 Refusal


Median 3 4 2

Notes: Numbers may not add up to 100% due to rounding.

Figure 25. Implied total transaction value in the past 12 months by online and non-online derivatives traders (2005)

32%20%

39%

34%

35%

34%

4%

8%

23%25%

21%

7% 12%4%

2%

0%

20%

40%

60%

80%

100%


1 - 10 11 - 50 51 - 100 More than 100 Refusal


Median 24 48 24

Aggregate volume as % of total 100% 72% 28%

Notes: Numbers may not add up to 100% due to rounding. Excluding outliners.


8. PERCEPTIONS OF THE HKEx MARKETS

• Stock investors’ perceptions of the HKEx stock market were generally positive and had improved compared with 2004.

• Frequent stock traders were more positive about “Regulation of stock brokers is effective” than non-frequent stock traders and non-trading stock investors but were less positive about “Hong Kong stock market is a fair and orderly market” and “listed companies have good disclosure of information”.

• The majority of derivatives investors were positive about the HKEx derivatives market’s fairness and orderliness and the availability of good trading information, similar to the views in 2004. However, fewer agreed that “Regulation of HKEx derivatives brokers is effective” and “HKEx derivatives investors are well-protected” than in 2004.

• Stock investors who traded mainly through broker firms were more positive on the effectiveness of stock broker regulation than those trading mainly through banks. Derivatives investors trading mainly through broker firms and those trading mainly through banks had similar views on the effectiveness of derivatives broker regulation.

• Comparing with 2004, a larger proportion of retail investors (more than 50%) agreed that “HKEx gives priority to the public interest”.

Notes: It should be noted that the findings on derivatives investors are subject to relatively large error due to the small size of the sample of derivatives investors in the survey. Due to the terminology used in the survey questionnaire, some derivatives investors might have responded to certain questions based on their perceptions of the derivative warrants market. Therefore, caution is needed in interpreting the findings on derivatives investors.

The survey assesses retail investors’ perceptions of certain aspects of the securities and derivatives markets operated by HKEx. Areas of assessment include those which would largely be outside the responsibilities of HKEx, such as the regulation of brokers and the regulation of insider trading.


Figure 26. Perceptions of the Hong Kong stock market (2004 and 2005)

40%

43%

49%

50%

50%

57%

56%

61%

59%

62%

67%

72%

69%

73%

76%

80%

22%

24%

26%

30%

23%

24%

23%

24%

22%

20%

19%

15%

19%

16%

16%

12%

26%

17%

20%

15%

25%

15%

18%

11%

12%

9%

10%

9%

10%

8%

6%

4% 3%

2%

3%

2%

4%

6%

4%

3%

4%

3%

5%

4%

10%

5%

15%

12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2004

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

2005

Agree Average Disagree No comment / don’t know

The Hong Kong stock market is a fair and orderly market

Regulation of stock brokers is effective

There is good trading information available in the Hong Kong stock market

Regulation of listed companies is effective

Listed companies have good disclosure of information

Stock investors are well-protected

Regulation of insider trading is effective

There are enough good quality listed companies available for investment



Figure 27. Comparison of perceptions of the Hong Kong stock market by frequent, non-frequent stock traders and non-trading stock investors* (2005)

44%

43%

42%

57%

50%

46%

61%

57%

55%

64%

61%

58%

59%

61%

64%

74%

70%

73%

75%

77%

67%

81%

82%

78%

23%

24%

26%

24%

31%

31%

20%

27%

23%

19%

25%

24%

16%

22%

21%

10%

17%

17%

15%

15%

17%

10%

13%

13%

14%

16%

22%

14%

13%

18%

16%

12%

19%

12%

9%

14%

12%

7%

8%

9%

9%

9%

7%

6%

13%

5%

3%

5%

19%

18%

10%

6%

10%

8%

4%

3%

3%

2%

4%

4%

2%

2%

5%

7%

13%

4%

4%

4%

5%

4%

4%

3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent

Non-trading

Non-frequent

Frequent


The Hong Kong stock market is a fair and orderly market


There is good trading information available in the Hong Kong stock market

Regulation of listed companies is effective

Listed companies have good disclosure of information

Stock investors are well-protected

Regulation of insider trading is effective

There are enough good quality listed companies available for investment

* Frequent stock traders are stock traders who traded more than 10 times in the 12-month period; non-frequent stock traders are stock traders traded 1 to 10 times in the 12-month period; non-trading stock investors are stockowners who did not trade stocks in the 12-month period.



Figure 28. Perceptions of the HKEx derivatives market (2004 and 2005)

52%

41%

58%

45%

55%

54%

54%

54%

22%

35%

32%

37%

23%

27%

26%

31%

24%

20%

8%

9%

22%

16%

19%

13%

2%

4%

2%

9%

2%

2%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2004

2005

2004

2005

2004

2005

2004

2005


The HKEx derivatives market is a fair and orderly market

There is good trading information available in the HKEx derivatives market

Regulation of HKEx derivatives brokers is effective

HKEx derivatives investors are well-protected


Figure 29. Perceptions of the effectiveness of broker regulation by investors trading through different channels

45%

46%

59%

67%

35%

38%

21%

20%

11%

7%

10%

6%

11%

6%

9%

8%

0% 20% 40% 60% 80% 100%

Derivatives investors tradingmainly through banks

Derivatives investors tradingmainly through broker firms

Stock investors trading mainlythrough banks

Stock investors trading mainlythrough broker firms



Regulation of derivatives brokers is effective



Figure 30. Perceptions of HKEx

42%

53%

52%

59%

59%

59%

28%

22%

23%

21%

18%

19%

26%

18%

18%

14%

14%

14%

5%

9%

8%

7%

7%

4%

0% 20% 40% 60% 80% 100%

Derivatives investors

Stock investors

All retail investors

Derivatives investors

Stock investors



2005

2004



HKEx gives priority to the public interest



GLOSSARY

Stocks: Shares, warrants and Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) listed or traded on HKEx.

Derivatives: Futures and options traded on HKEx.

Stockowner: An individual who was holding stocks at the time of the interview.

Stock trader: An individual who had traded stocks in 12 months preceding the interview.

Non-trading stock investor: A stockowner who had not traded stocks in 12 months preceding the interview.

Stock investor: An individual who was holding stocks at the time of interview or had traded stocks in the 12 months preceding the interview. (That is, the individual is a stockowner and/or a stock trader.)

Derivatives investor: An individual who was holding derivatives at the time of interview or had traded derivatives in 12 months preceding the interview..

Retail investor: An individual who is a stock investor and/or a derivatives investor.

Stock-only investor: An individual who is a stock investor but not a derivatives investor.

Derivatives-only investor: An individual who is a derivatives investor but not a stock investor.

Stock-and-derivatives investor: An individual who is a stock investor and a derivatives investor.

Online stock trader: A stock trader who had traded stocks in 12 months preceding the interview through electronic media such as the Internet, either always or sometimes.

Non-online stock trader: A stock trader who is not an online stock trader.

Online derivatives trader*: A derivatives investor who had traded derivatives in 12 months preceding the interview through electronic media such as the Internet, either always or sometimes.

Non-online derivatives trader*: A derivatives investor who is not an online derivatives trader.

Non-investor: An individual who is neither a stock investor nor a derivatives investor.

* Reflecting the nature of derivatives trading, all derivatives investors had traded derivatives in 12 months preceding the interview.


APPENDIX 1. SURVEY METHODOLOGY

(1) Methodology

The survey fieldwork was conducted in December 2005. A random sampling process was adopted to select individuals aged 18 or above in the Hong Kong population. Selected individuals were interviewed through telephone in accordance with a structured questionnaire. The survey was conducted in two stages of random sampling. The first stage was to find out the incidence of retail investors among the Hong Kong adult population. In this stage, 2,020 individuals were interviewed, of which 570 were stock investors and 49 were derivatives investors. The second stage was to interview an additional sample of stock investors to boost the sample size of stock investors to over 1,000, thereby providing more reliable analysis results on this investor type. In this stage, 435 additional stock investors were interviewed; among them, 28 were also derivatives investors. In total, 2,455 individuals were interviewed, of which 1,005 were stock investors and 77 were derivatives investors.

(2) Limitations

• Since the survey findings are projected figures/estimates concerning the whole Hong Kong adult population, they are subject to sampling error. For stock investors, the sample size is regarded as large enough to produce survey findings with acceptable levels of precision. For derivatives investors, in respect of whom the number in the sample was much smaller, the findings are subject to bigger possible error.

• Some responses were perceptions or estimates of respondents that might deviate from the truth, such as frequency of trading and value of trading.

• Respondents might intentionally not tell the truth on sensitive questions such as income level.

• Due to the terminology used in the survey questionnaire, some derivatives investors might have responded to certain questions based on their perceptions of the derivative warrants market.

(3) Comparability with past surveys

• The definition of “Hong Kong stocks” includes shares, warrants, Exchange Traded Funds (ETFs) since the 2001 survey and Real Estate Investment Trusts (REITs) in 2005. In prior surveys, it referred to shares, warrants and stock options, these being SEHK’s products at that time. Nevertheless, the proportion of stock investors who invested exclusively in stock options but not shares was negligible. The incidence of retail stock investment should be comparable.

• The definition of “adults” in surveys before 1997 referred to individuals aged 21 or above. Since 1997, the definition was revised to individuals aged 18 or above.

• Minor amendments were made to the definition of online stock traders in the past surveys. In the 2000 survey, online traders were stock investors who had placed orders via Internet in the past 12 months preceding the interview. In 2001 survey, online traders were stock investors who had traded stocks through electronic media such as the Internet and mobile phone, either always or sometimes. Since 2002, this definition was confined to trading in the past 12 months preceding the interview. Such amendment of the definition is expected to have little material impact on the comparability of the findings.


APPENDIX 2. RESPONDED SAMPLE BY INVESTOR TYPE

Responded type Number in responded sample10

Retail investors 1010

Stock investors 1,005 Stockowners 951 Stock-only investors 933 Stock-and-derivatives investors 72 Stock traders 827 Online stock traders 314

Derivatives investors 77 Derivatives-only investors 5 Stock-and-derivatives investors 72 Derivatives traders 77 Online derivatives traders 30

Non-investors 1,445

Total sample 2,455

10 Since the survey adopts a two-stage sampling process and a weighting process on each respondent type for

projection onto the overall population, the number of respondents for the various investor types in the responded sample should not be used to calculate their respective participation rates.


APPENDIX 3. PRECISION OF SURVEY FINDINGS

Table A. Relative errors of the proportion of the various investor types

Investor type Proportion Relative error11 95% confidence interval

Among adult population Stock investors 28.6% 3.2% 26.8% – 30.3%

Stockowners 27.0% 3.3% 25.3% – 28.8%

Stock-only investors 26.4% 3.4% 24.7% – 28.2%

Stock-and-derivatives investors 2.1% 13.7% 1.6% – 2.7% Stock traders 23.6% 3.6% 21.9% – 25.2%

Derivatives investors 2.4% 12.9% 1.8% – 3.0%

Among stock / derivatives investors Online stock traders 31.8% 4.6% 28.9% – 34.6% Online derivatives traders 37.4% 15.4% 26.1% – 48.8%

Table B. Relative errors of the projected number of the various investor types

Investor type Estimated population (’000) Relative error11 95% confidence

interval (’000)

Stock investors 1,618 3.2% 1,516 – 1,719 Stockowners 1,531 3.3% 1,432 – 1,631

Stock-only investors 1,497 3.4% 1,398 – 1,596

Stock-and-derivatives investors 121 13.7% 88 – 153

Stock traders 1,335 3.6% 1,240 – 1,430

Online stock traders 514 4.6% 467 – 560

Derivatives investors 135 12.9% 100 – 169 Online derivatives traders 50 15.4% 35 – 66

11 The relative errors were derived by assuming simple random sampling.


Table C. Relative errors of the projected number of the stock traders

by trading channel

Type of trading channel Estimated adult population (’000) Relative error12 95% confidence

interval (’000)

Mainly through banks 855 2.6% 812 – 899

- banks only 789 2.9% 744 – 834

- usually through banks 66 15.2% 47 – 86

Mainly through broker firms 480 4.6% 436 – 523

- broker firms only 411 5.2% 369 – 453 - usually through broker firms 69 14.9% 49 – 89

Table D. Relative errors of the projected number of the derivatives traders by trading channel

Type of trading channel Estimated adult population (’000) Relative error12 95% confidence

interval (’000)

Mainly through banks 72 10.6% 57 – 87

- banks only 65 11.7% 50 – 80

- usually through banks 7 50.1% 0.1 – 13

Mainly through broker firms 63 12.2% 48 – 78

- broker firms only 55 13.6% 41 – 70 - usually through broker firms 7 47.7% 0.5 – 14

*** End ***

12 The relative errors were derived by assuming simple random sampling.

7. online traders - hong kong stock exchange...• compared to non-online stock traders, online...

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