Hong Kong retail investors' derivatives usage trebles

The number of Hong Kong retail investors buying derivatives increased three-fold last year, according to a survey released this week.

About 5.2% of Hong Kong adults, or 280,000 individuals, were holding, or had traded, derivatives products on the financial centre’s exchange in December last year. This was up from 1.5%, 79,000 individuals, in November 2000.

Hong Kong Exchanges and Clearing (HKEx), which conducted the survey and runs the region’s exchanges, said the participation rate is still low, despite the increase. “The introduction of Mini-HSI futures in October 2000, for which 88% of turnover was contributed by retail investors, might be one major reason for the increase,” said HKEx. Mini-Hang Seng Index (Mini-HSI) futures are aimed at retail investors and are based on Hong Kong’s benchmark Hang Seng Index.

“Stock investors who also invested in HKEx derivatives products were more active traders – holding stocks for a shorter time period, trading more frequently – and were more aggressive in taking risks for higher returns,” added HKEx.

Of those not investing in derivatives, 49% of respondents gave ‘no spare money’ as the reason; while 45% said it was because they had insufficient knowledge of the market or its products. About 11% regarded derivatives investment as being too risky.