Equities 股票

Investing in Equities 股票投資

An ordinary share gives its holder an ownership interest in a company. Ordinary shareholders have a residual claim: on liquidation, they receive only what remains after creditors and preference shareholders have been satisfied, so they may receive nothing.

Hong Kong listed securities are cleared and settled through the Central Clearing and Settlement System (CCASS), using electronic book entries rather than moving certificates for every trade. CCASS handles clearing and settlement; it is not an exchange through which investors trade directly.

Under the custody arrangements covered by the supplied notes, investors may register physical certificates in their own names or use a bank or broker for custody; replacing lost certificates can be slow and costly. Where shares are held in the intermediary's CCASS account, CCASS records that participant's holding directly. An investor's own CCASS account provides greater control over custody, but trading still requires a bank or broker. [HKEX: Investor Account Services](https://www.hkex.com.hk/Services/Settlement-and-Depository/Investor-Account-Services?sc_lang=en)

A company can raise money through borrowing or equity. Ordinary dividends do not carry the scheduled payment obligation associated with debt interest, giving equity financing greater payment flexibility, but not necessarily a lower economic cost. Listing also provides a route to later fundraising, although a rights issue still depends on factors such as shareholders' willingness to subscribe.

Methods of Raising Equity 股票融資的方法

An initial public offering (IPO) offers shares to the public as a company seeks a listing. In Hong Kong, the sponsor performs due diligence and assists with the listing application; the prospectus explains the business, finances, prospects and intended use of proceeds. The lead manager organises marketing and distribution. Under a typical underwriting arrangement, underwriters take up unsubscribed shares, a responsibility distinct from the sponsor's work.

The supplied 2023 material identifies the Main Board's profit, market capitalisation/revenue/cash flow, and market capitalisation/revenue tests. The profit test requires at least three financial years' trading history under substantially the same management, ownership continuity and control for the latest audited financial year, and shareholder-attributable profits of at least HK$35 million in the latest year and HK$45 million in aggregate for the preceding two years. [HKEX: Equity Listing Eligibility](https://www.hkex.com.hk/Listing/Explore-By-Role/Potential-Applicants/Equity-Securities?sc_lang=en) The material also gives Main Board minimum expected market capitalisations of HK$500 million overall and HK$125 million in public hands. Its GEM cash flow test has no profit requirement, but requires aggregate positive cash flow from adjusted operating profits of HK$30 million over the preceding two years, before working capital changes and taxes paid, and market capitalisation of HK$150 million. These are selected requirements from that edition.

A private placement offers shares to selected investors, usually including professional investors such as funds or high net worth clients, rather than the general public. Company-issued equity warrants give holders a right to subscribe for shares at a predetermined price before a deadline, without an obligation to exercise.

A rights issue invites existing shareholders to pay for new shares in proportion to their holdings. They may subscribe, sell the rights or do nothing; if new shares are issued without their participation, their ownership percentage is diluted. With 1,000 shares priced at HK$1, a one-for-four issue at HK$0.75 permits subscription for 250 shares costing HK$187.50. Assuming no other changes, the theoretical ex-rights price is (1,000 + 187.50) ÷ 1,250 = HK$0.95. The theoretical value of the rights needed to subscribe for one new share is HK$0.20.

Why Invest in Equity 投資股票的原因

Ordinary shares allow investors to participate in a company's long-term development. Hong Kong ordinary shares are generally fully paid, so holders are not required to contribute further capital merely because the company cannot meet its debts. In their capacity as holders of these shares, their loss is generally limited to the amount invested, but that amount can be lost entirely.

Total equity return combines dividends and changes in share price. Business growth may support increasing dividends and capital gains; falling prices produce capital losses that may exceed dividends received. Earnings support a company's value, so a company need not pay dividends to have value.

Price earnings ratio = current share price ÷ earnings per share for the past twelve months; return on equity = earnings ÷ book value of shareholders' funds; dividend yield = current annualised dividend per share ÷ current share price × 100%. Dividend yield uses share price, rather than earnings per share, as its denominator.

The pay-out ratio is the percentage of earnings distributed as cash dividends; the retention ratio is the percentage kept for future development. Where earnings are divided entirely between these uses, the ratios total 100%. Retaining earnings may support growth but does not guarantee successful investment.

Bonus Issue 紅股派送

A bonus issue capitalises profits by distributing additional shares free of charge to existing shareholders in proportion to their holdings. A rights issue requires payment, whereas a bonus issue does not; the bonus issue itself brings no new cash into the company.

An investor holding 1,000 shares at HK$1 each has 1,250 shares after a one-for-four bonus issue. With other factors unchanged, the investment remains worth HK$1,000 and the theoretical ex-bonus price is 1,000 ÷ 1,250 = HK$0.80. More shares do not themselves produce an immediate corresponding increase in wealth.

Dividend 股息

Dividends distribute company earnings to shareholders; the notes mainly discuss cash dividends. Interim and final dividends are common in Hong Kong, but neither frequency nor amount is guaranteed. Changes may signal management's assessment of future earnings, and market valuations respond to investors' interpretation.

The ex-dividend date determines whether a purchase carries entitlement to that dividend: purchases before it qualify, while purchases on or after it do not. The same ex-entitlement principle applies to rights and bonus issues. The eventual payment or distribution date does not determine purchase entitlement. [HKEX: Dividends and Ex-dividend Trading](https://www.hkex.com.hk/Global/Exchange/FAQ/Products/Securities?sc_lang=en)

Distinguish the ex-dividend date, record date and payment date. The supplied 2023 material assumes an ex-dividend date two business days before the record date. Date questions should follow their stated assumptions and announced dates; this textbook assumption should not be treated as a universal calendar formula for every company's arrangements.

Stock Exchange of Hong Kong (SEHK) 香港聯合交易所（聯交所）

SEHK was established in 1980 and became fully operational in 1986 following the consolidation of four exchanges; GEM was established in 1999. SEHK is a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), providing the Main Board and GEM markets for fundraising and securities trading. [HKEX: SEHK and GEM](https://www.hkex.com.hk/News/Regulatory-Announcements/2023/2312152news?sc_lang=en)

In the primary market, new shares are issued and subscription money goes to the company; an IPO is one example. In the secondary market, investors trade existing shares and payment goes to the seller. A rising share price or increased turnover does not itself provide the company with new equity capital.

SEHK-listed products extend beyond ordinary shares to debt securities, warrants, equity linked instruments, exchange traded funds, callable bull/bear contracts and real estate investment trusts. An exchange traded fund may track an index; a real estate investment trust principally seeks income through a portfolio of income-generating properties. A common listing venue does not give products identical rights or risks.

Electronic trading systems receive orders and match trades, while CCASS handles clearing and settlement. The supplied notes discuss trading using the name AMS/3. HKEX was already identifying its securities trading system as OTP-C in 2021, so AMS/3 should be understood as a historical system name in the notes. [HKEX: Securities Trading System Information](https://www.hkex.com.hk/News/Market-Communications/2021/210927news?sc_lang=en)

International Markets 國際市場

Cross-border capital flows connect major equity markets. Trade links, the linked exchange rate and Hong Kong's opening after the US market closes mean US news may influence Hong Kong's opening, without guaranteeing matching market movements. The notes give Hong Kong's pre-opening session as 9:00 am to 9:30 am, allowing orders to be brought together before continuous trading.

Important US examples include the New York Stock Exchange and Nasdaq; the notes also refer to the historical American Stock Exchange name, AMEX. European examples include Euronext, the London Stock Exchange and Deutsche Börse. Asian markets include Shanghai, Shenzhen, Tokyo, Hong Kong, India and Korea. The European Union and the euro area are different: not every EU member uses the euro.

The notes focus on Shanghai and Shenzhen, regulated by the China Securities Regulatory Commission. A shares trade in renminbi; Shanghai B shares trade in US dollars and Shenzhen B shares in Hong Kong dollars. Overseas access to A shares developed through arrangements including the Qualified Foreign Institutional Investor programme (QFII), launched in 2003, and later Stock Connect. A shares should therefore not be described as accessible only to Mainland residents.

Shanghai-Hong Kong Stock Connect began on 17 November 2014. Northbound trading gives Hong Kong and overseas investors a channel to eligible Mainland shares; Southbound trading gives eligible Mainland investors access to eligible Hong Kong shares, with different eligibility restrictions. Aggregate quotas were abolished from 16 August 2016, which did not remove every restriction. Mutual Recognition of Funds, starting on 1 July 2015, concerns cross-border fund distribution and differs from direct share trading through Stock Connect.

Market Indexes 市場指數

A market index summarises the performance of a group of securities in a comparable numerical form. It helps investors follow market movements and assess whether a fund beats its benchmark. An index represents its constituents and methodology, not an identical return for every share.

The Hang Seng Index was launched on 24 November 1969 and is managed by Hang Seng Indexes Company Limited. The supplied material records 76 constituents in April 2023, free float-adjusted market capitalisation weighting and an 8% individual stock cap. Free float adjustment excludes strategic holdings not readily available for trading, while the cap limits domination by one stock. [Hang Seng Indexes: 2023 Constituent Information](https://www.hsi.com.hk/static/uploads/contents/en/news/pressRelease/20230224T163000.pdf) That edition also identifies selection universes covering the top cumulative 90% by market value and turnover, normally with at least 24 months' listing history, subject to specified arrangements for large-cap stocks.

The notes give the Hang Seng Composite Index Series a target coverage of the top cumulative 95% of Hong Kong market capitalisation. Its large-cap, mid-cap and small-cap indexes correspond to the first 80%, next 15% and remaining 5% of the Composite Index's own cumulative market capitalisation, rather than those proportions of the entire market. There are also 12 industry indexes. The Composite Index uses free float-adjusted market capitalisation weighting with individual and category caps; no additional caps apply to its size and industry indexes.

The Dow Jones Industrial Average covers 30 large US companies and is price weighted; the Standard & Poor's 500 covers 500 large-cap stocks and is market capitalisation weighted. The Nasdaq Composite is heavily exposed to information technology, while the Nasdaq-100 covers 100 large non-financial companies within it. The UK's FTSE 100 is market capitalisation weighted, Japan's Nikkei 225 Stock Average represents its market, and MSCI indexes commonly serve as fund benchmarks.

Fundamental Investment Analysis 基本因素投資分析

Fundamental investment analysis uses economic, political, industry and company information to estimate intrinsic value. A top-down approach starts with global and domestic conditions, such as GDP, interest rates and inflation, then selects industries and companies. A bottom-up approach starts with individual companies before considering industries and the economy.

The industry life cycle has start-up, consolidation, maturity and decline stages. Start-up offers rapid growth with substantial failure risk; consolidation brings emerging leaders; maturity brings growth closer to the economy's rate and price competition that squeezes margins. In decline, obsolete products and substitutes cause growth to lag behind the economy. Analysis also considers competitive structure, entry barriers, technology and government policy.

Ratio analysis compares financial statements across years and peers, mainly describing historical performance rather than guaranteeing future results. Current ratio = current assets ÷ current liabilities; quick ratio = (current assets − inventory) ÷ current liabilities: both assess short-term repayment capacity. Return on equity = profit after tax ÷ shareholders' funds; earnings per share = profit after tax ÷ issued shares; price earnings ratio = share price ÷ earnings per share. The notes define debt ratio as total debt ÷ total assets and gearing ratio as total debt ÷ shareholders' funds, addressing longer-term solvency.

The dividend discount model (DDM) values expected future dividends at present value. Constant growth gives P = D₁ ÷ (r − g), where D₁ is next year's expected dividend, r the required return and g constant growth, with r > g. Zero growth gives P = D ÷ r, with D the fixed annual dividend. The P/E model compares peers, but a high ratio may indicate growth expectations or overvaluation, and a low ratio is not necessarily cheap. The capital asset pricing model (CAPM) relates required return to market sensitivity measured by beta; a higher beta generally means greater sensitivity to market movements.

Technical Analysis 技術分析

Technical analysis uses historical trading data, such as prices, to identify trends and possible turning points rather than estimating intrinsic value from financial statements. It relies on past patterns remaining informative, and no signal guarantees an accurate prediction.

A bar chart shows the period's high and low with a vertical line, and opening and closing prices with left and right marks. Point and figure charts use crosses for rises and circles for falls. A candlestick's body spans opening and closing prices; the notes use black when the close is below the open and white when it is above. Charts help identify trend lines, support and resistance.

A moving average averages closing prices over a specified period; examples include 10-day, 20-day and 250-day averages. A price crossing above its average, or a shorter average crossing above a longer one, is commonly treated as a buying signal. A downward crossing is commonly treated as a selling signal, but false signals can occur.

The relative strength indicator (RSI) compares closing-price movements on up and down days over a period, commonly 14 days on a 0–100 scale. Below 30 normally indicates oversold conditions; above 70 indicates overbought conditions, without guaranteeing an immediate rebound or fall. Other methods include wave theory's five upward and three downward waves, and the Fibonacci sequence and golden ratio.

Advantages of Equities 投資股票的好處

Equities offer dividend income, capital appreciation and participation in company ownership. Fully paid ordinary shares generally also provide limited liability, so shareholders need not add capital merely because the company has debts. This protection does not guarantee the safety of the original investment.

Actively traded shares are generally easier to sell, although smaller or thinly traded stocks may lack comparable liquidity. Equities offer the potential for higher long-term returns than bonds, and companies may offset inflation through higher selling prices and earnings. These are potential advantages, not outcomes assured for every period or company.

When choosing an equity-related investment option through an investment-linked assurance scheme, the policyholder owns the policy rather than the underlying shares directly, and charges affect policy returns. [IFEC: Understanding Investment-linked Assurance Schemes](https://www.ifec.org.hk/web/tc/financial-products/insurance/product-types/ilas/basics/understanding-ilas.page) If a calculation specifies that a premium charge is deducted before the balance is fully allocated to units, units allocated = amount after the charge ÷ unit price. The whole premium must not automatically be treated as invested.

Disadvantages of Equities 投資股票的弊處

Fluctuating company earnings affect dividend capacity and investors' valuations, while share prices can move sharply over short periods. Shareholders have neither guaranteed fixed dividends nor a principal repayment date comparable to a maturing bond. Selling can produce a substantial loss even while the company remains in business.

Company risk concerns problems with an individual business or its finances; market risk concerns movements in the wider stock market; economic risk includes recession, interest rates and other economic changes. Diversification reduces dependence on one company but cannot remove the effects of broad market and economic falls.

Poor liquidity may prevent a timely sale or force acceptance of an unattractive price. On liquidation, ordinary shareholders' residual position may result in total capital loss. Limited liability restricts shareholders' additional responsibility for company debts; it does not restrict how far the share price can fall.