SFC Survey Points To Need For Better Investor Education

by Mary Swire, for LawAndTax-News.com, Hong Kong

13 March 2006

According to a survey recently conducted by Hong Kong's Securities and Futures Commission, around 470,000 more Hong Kong people invested in financial products in the last two years, but retail investors' knowledge needs improvement.

Conducted from September to November 2005, the survey estimated retail participation in different investment products, and measured retail investors' level of financial understanding.

Of the 5,210 people interviewed, 1,915 had invested in one or more products in the previous two years. This represented a participation rate of 36.8%, or about 2.1 million people, up from 29.8%, or about 1.63 million people, in a similar survey in 2003.

Hong Kong stocks were still the most popular investments with a participation rate of 28.3%, up from 23.8%. Managed funds (excluding MPF investments) ranked second. The participation rate nearly doubled to 18.1%.

However, for the first time, the survey used seven multiple-choice and yes/no questions to test investors' level of financial understanding in some issues on basic investor rights and the most common investment tools.

The average score was 3.39 out of 7. The correct rate per question ranged from 40.4% in the question about equity-linked deposits to 53.2% in the question about voting rights.

In addition, over 90% of retail and potential investors 'strongly agreed' or 'agreed' that the securities industry as a whole should do more to educate the public about how to make informed investment decisions.

Speaking with regard to the survey results, Commission Chairman Martin Wheatley observed that:

"The results are thought-provoking and we may broaden the scope of questions when we do a similar exercise in the future."

He continued:

"As indicated in the survey, it is important for all parties - regulators, market operators, investment advisers, brokers and educators - to each play an appropriate role in increasing the financial knowledge of our retail investors."

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