A dilettante's foray into the Hong Kong stock exchange

So I've lived here 3 years. I've bitched, I've complained and now I'm going to put my money where my feet are. Yes, that's right, I'm going to invest in Hong Kong and (gasp!) possibly Chinese companies.

After being gainfully employed in Hong Kong for more than 8 months now, I have happily saving my money for this very moment, the moment I can enter the wide and wonderful world of the Hang Seng 恒生 stock exchange. I've been doing a bit of research for the last few months and have been talking to friends, family and any man, woman and child who are willing about the Hong Kong stock market. I've yet to take the giant leap yet, but I will be in the next month or so. Parents are still here and I'm waiting for the right time to jump into the market, if there ever really is a right time.

Before I continue, I must say that what I write here is solely my own opinion and what I have heard from others and is pure conjecture from a dilettante when it comes to most topics covered, including what I know about stocks. For my Chinese friends who just read the above and have no clue what I wrote, that's just lawyer talk for don't take any stock tips from me.

Anyway, for those of you still interested in what's going on with regards to the stock market, let me give you some basic info for outsiders. For those of you who live in HK and invest in the Hang Seng or just know more than me, please feel free to correct any mistakes I have made.

First of all, for a foreigner coming into the Hang Seng, it is interesting to note that you cannot buy any old number of shares that you want. You have to buy a 'board lot' which is the minimum number of shares that you need to buy. On the Toronto and New York stock exchanges where I have invested before, you can buy any number of shares you want-but this is not the case in Hong Kong. Let me use HSBC 汇丰银行 as an example.

One stock that I will be buying if not now but in the very near future is HSBC which I'm sure most of you have heard of if you don't pass one on your daily commute to school/work. HSBC is a huge bank in HK and is weighted about 30% of the whole Hang Seng stock market index! I heard rumours that 1 in 3 (or was it 4?) Hong Kong people do business with HSBC. On top of that, Hang Seng bank, another large bank in HK is owned by HSBC. Back to the board lot topic, the board lot for HSBC is 400 shares. With a current share price of $134.90HK, that means you would have to invest a minimum of $53,960HK to buy shares into HSBC! I don't know about your finances but that is quite a bit of my savings right there. Thankfully, I'm a conservative investor and my goals for investing are set towards collecting dividends and long term appreciation. Daily stock prices don't matter to me (my heart thanks me for this0 as much as long term trends. I go by the motto: "The best stocks are the ones you never sell." I'll be buying HSBC and holding them for the next 20-30 years, if not longer.

I wasn't always this conservative, back in the late 90s I was a wide eyed university student who played the stock market during the tech boom and bust. In 1999, I was able to time the market correctly during the share price rise of all stocks connected to the Linux craze and bought into Canadian company Corel and was able to make my junior year university tuition in a couple of weeks with Corel's amazing rise before the company's stock price crashed.

Of course, it wasn't all fun and games as I lost big time on Nortel (that stupid Canadian company!) and a few other technology plays after that. Also, I've learned never to invest in airlines after buying into the now defunct Canada 300 airlines. Here's an interesting fact: in the history of aviation history, if you lumped all of the world's airlines' profits and losses together the number is a negative.

Needless to say, I've learned my lessons and will invest conservatively with an eye towards the long term future. Afterall, being a contract worker and living outside of Canada doesn't allow me to rely on a cushy pension like my parents are able, so I'll have to save and invest money for my retirement on my own.

So what's considered conservative? Banks, utilities and insurance providers. I'm going to be investing in these kinds of companies in HK who have traditionally made money over the long term. Case in point: in the last 30 years, Hang Seng bank has grown by over 200 times. I wonder how many companies can boast this kind of growth. When I read that I was shocked and impressed-so where do I sign up?

One good thing about buying and selling shares in HK is that it is much cheaper to do so than in other stock markets. It gets pretty cheap in the US to buy and sell stocks but in HK the brokerage houses take a very small percentage of the sale price. Take a look at HSBC's investing website for a guide. I won't be going with HSBC but will be going with a friend's recommendation on a smaller brokerage house with the lowest fees in Hong Kong. I've looked into this company and they seem pretty solid. I like the fact they've been around for 30 years and my friend who is an experienced businessman and stock trader uses them and recommends them so I'm not worried about any problems with them.

One problem that has creeped up in my research of the HK market is that of mainland Chinese companies. Many of you know about my love/hate relationship with mainland China and when it comes to business in China, it's mainly a hate relationship. However, as an investor, I think it's best emotions shouldn't get mixed up with making money, especially if it has a negative influence. Having said that, from what I gather, there are some good Chinese companies out there that even though are molested by the government are good investment prospects. I tend to lean towards the Chinese companies that are branching out into the world where they have to play by the rules whereas domestically, they can make their own rules with governmental help, if they aren't already pseudo-state run companies. This is why I wouldn't invest in any banks in China, at least not in the short-medium future. I look at massive debt that Chinese banks are saddled with and knowing how the banks are operated scares the hell out of me but with the crazy lineups in HK to sign up for the recent Bank of China IPO many people disagree with me. Good luck to them!

As an expat investing in HK, we must be aware of our tax situations. I cannot speak for whatever country you originate from but since I am applying for non-resident status in Canada, I will be exempt from paying any income or capital gains taxes from HK. Also, there are no capital gains in HK although I read over the weekend that the American government has changed its tax requirements for expats living abroad so if you are American you will want to read up about these changes..tough luck guys!

So what stocks am I looking at? HSBC, Hang Seng, Bank of East Asia, HK electric, China Light and Power, HK conglomerate Hutchison Whampoa, Manulife insurance and a couple of Chinese companies that look OK to me are Petro China, China Mobile and

Some websites to gleen info on the Hang Seng and stocks listed there:

Yahoo Finance is a little hard to navigate but you'll eventually find stock listings for the HK market.

Hang Seng stock exchange website provides good info. Make sure you click on 'investor' on the left side bar to get company info.

This website also provides some good stock info.

This forum post at Geoexpat.com also about other people's thoughts, advice regarding the buying and selling of stocks in HK. You can sign up and leave any questions you have there.

After my parents and guests leave, I'll have time to do more research and finally sign up with the brokerage house mentioned above. If any of you readers have comments, criticisms or stock tips, feel free to leave a comment or email me. Good luck to those who invest in the Hang Seng!