Ma Urges Hong Kong Stock Investors To Keep A Cool Head

by Mary Swire, Tax--News.com, Hong Kong

29 November 2006

Only those who keep a clear head and do their homework will profit from stock investment, Secretary for Financial Services and the Treasury Frederick Ma has cautioned.

Noting that daily turnover of Hong Kong's stock market has soared to over HK$40 billion (US$5.14 billion), a rise on the HK$6 billion recorded in 2002, Mr Ma has urged investors not to get carried away with the bullish sentiment currently pervading the market place.

"Do your homework and invest within your means. It is the only way to arrive at a full understanding of the operation of the industries and companies in which you plan to invest," Mr Ma said in an article posted on the department's website.

"Developing an understanding of your potential investment is like peeling an onion - you work your way down from one layer to the next," he observed.

With the recent wave of initial public offerings, Ma went on to note that many new stocks have accumulated a significant increase in prices within a short period of time, providing investors with an incentive to subscribe to shares by means of margin lending, effectively borrowed money.

"It should be borne in mind that the profitability of an enterprise should be the prime consideration in new stock investment," Ma said.

"If you subscribe to shares beyond your means on the belief that there will be a substantial increase in the prices of new stocks, your investment risk will undoubtedly be much higher," he warned.

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