AsianFin -- Hong Kong’s stock exchange is exploring measures to make it easier for investors to buy some of the city’s most expensive stocks, aiming to boost trading activity, according to sources familiar with the matter.
In recent discussions between Hong Kong Exchanges & Clearing Ltd. (HKEX) and brokerage firms, officials proposed streamlining the minimum trading unit, or board lot, for individual stocks, the sources said. Currently, the board lot size is determined by each company and can range from 100 shares to thousands of shares per trade. This contrasts with markets like mainland China, where a standardized unit of 100 shares—or even a single share—is typical.
For instance, purchasing shares of Chinese automaker BYD Co., whose stock has risen about 35% this year, requires a minimum investment of HK$177,500 ($22,848) for a board lot of 500 shares. Similarly, HSBC Holdings Plc and Alibaba Group Holding Ltd. trade at 400 and 100 shares per lot, respectively.
While Hong Kong does allow trading of partial board lots, the process is more expensive due to infrastructure limitations. To address this, officials have also discussed mandating the same pricing for single-share trades as for board lots, which could enhance liquidity and make high-value stocks more accessible to retail investors. This approach would also avoid the need for extensive adjustments to derivatives products and settlement systems, which are aligned with existing board lot sizes.
The proposed changes aim to stimulate trading activity in Hong Kong’s stock market, which has faced challenges in recent years, including reduced liquidity and declining investor confidence. By lowering the financial barrier to entry for high-value stocks, the exchange hopes to attract a broader base of investors and reinvigorate market participation.
The discussions are still in the early stages, and no final decisions have been made. However, the move reflects HKEX’s efforts to adapt to evolving market dynamics and remain competitive globally. If implemented, the changes could significantly reshape the trading landscape in Hong Kong, making it more accessible to both retail and institutional investors.
As the exchange continues to explore these options, market participants will be closely watching for further developments, which could have far-reaching implications for Hong Kong’s position as a leading global financial hub.
