Investor Education Centre Survey Reveals Hong Kong Investors' Attitudes and Behaviour
One-third said they had invested in unsuitable products and most failed to do their research properly even though close to 90% claimed to have done their homework
27 September 2017
- Three out of five Hong Kong people (60%) surveyed made at least one investment in the past 12 months, with nearly one-third (31%) having invested in an unsuitable product.
- Almost all (90%) investors claimed to do research before investing, but most rely on advice from friends and family with only a handful (9%) reading the relevant financial documents.
- Close to two-thirds (64%) of investors have used online trading platforms but many are concerned about risks associated with system reliability, privacy and cybersecurity.
In a mature financial market with access to a wide range of financial products and services, Hong Kong people are generally active investors. The Investor Education Centre (IEC) "Retail Investor Survey", conducted in August 2017, showed that almost three out of five of Hong Kong adults surveyed had invested in the financial markets during the past 12 months. Stocks (48%), foreign exchange (27%) and funds (14%, excluding MPF/ORSO retirement plan) were the most common financial products held or traded.
Among the investors surveyed, one in three had experienced making an unsuitable investment. Citing reasons about why they felt that the investment was unsuitable, 43% found that the product had adversely affected their liquidity, 23% acknowledged that it was too risky, and 23% said that it was different from their initial understanding. Not surprisingly, more than half (65%) said the investment had caused them to lose money.
Mr David Kneebone, General Manager of the IEC, said, "Hong Kong people are open to investing, and the vast majority of investors understand that it is vital to do research in order to make an informed decision. Yet, a portion of investors regret the choices they have made."
"Before making any investment decisions, first look at your entire financial situation and be clear about your risk tolerance and investment objectives. After having identified an appropriate investment product, do spend the necessary time to study the product's features thoroughly. Always read the relevant documents and seek professional advice to help you make a wise decision," added Mr Kneebone.
Inadequate research resulting in bad investment decisions
Among those investors who claimed to have conducted prior research, one-fifth put in just a few hours, with another 37% spending a few days. Three-quarters of them said that advice from friends and family influenced their decisions, and only 35% sought advice from professionals such as securities brokers or bank relationship managers. Less than 10% had bothered to study the prospectus or investment documents. One in ten investors said they had not done any research at all.
Notwithstanding the lack of research and analysis, investors are optimistic about the returns. On average, investors surveyed expected a return on investment (ROI) rate of 17% per annum, 47% expected a return between 10% and 20% per annum, and close to one-third (32%) expected 20% or more.
Mr Kneebone said, "Over two-thirds (68%) of investors who responded are investing for their retirement savings, therefore it makes sense to take a long-term approach in their investment strategy. Though the Hang Seng Index has climbed up more than 25% in the first eight months of 2017, we should also be mindful that it had gained only 0.4% last year and fell by 7.2% in 2015. Tracking the Index, the Tracker Fund's annualised return for the past five years stood at 7.4%."
Investors' concern on cybersecurity
Over 60% of investors in the survey reported using online platforms to trade financial products during the past year. However, they expressed concerns on the reliability and security of the trading channel. Personal information leakage (55%), system breakdown (52%) and cyberattack (43%) are the top three areas of concern.
"While online trading is growing in popularity due to its convenience and lower fees, it also comes with various security and technology risks," Mr. Kneebone said. "People's online practices play a significant role in minimising their susceptibility to account hacking. Always set a strong password and watch out for social engineering traps and scams."
What's new: Investor Portal
To help the public make well-informed decisions and become smart investors, the IEC has launched an Investor Portal on its financial education platform The Chin Family. The one-stop resource provides independent and comprehensive product and market information to help both new and seasoned investors make informed decisions, and to help protect them against risks, frauds and scams.
The launch of the Investor Portal is part of the IEC's ongoing investor education initiative to celebrate World Investor Week (WIW), a global initiative which takes place from 2 to 8 October 2017 to raise awareness about the importance of investor education and protection. With the backing of the Hong Kong Securities and Futures Commission, IEC is the key supporter and lead for WIW in Hong Kong.