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What is the Hong Kong Stock Exchange?

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  • Written By: James Doehring
  • Edited By: Lauren Fritsky
  • Last Modified Date: 10 November 2016
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The Hong Kong Stock Exchange is a large stock exchange based in Hong Kong, China. It is Asia’s second largest by market capitalization, behind only the Tokyo Stock Exchange. It originally formed as the Association of Stockbrokers in Hong Kong in 1891. The exchange is operated as a company that serves a global base of customers. Over 1,200 different listings are offered by the exchange.

A stock exchange historically was a physical space for investors to gather and trade stocks. Stocks are a form of ownership of a company—the value of a stock is directly tied to the value of the company. Therefore, investors speculate on how the value of different stocks will change in the future, and they try to maximize their profits by buying up stocks before they increase in value. In recent times, a number of variations of stocks are traded on the Internet.

The precursor to the Hong Kong Stock Exchange, the Association of Stockbrokers in Hong Kong, was founded in 1891. After the Second World War, the exchange merged with a competitor, but retained its original name. The exchange adopted electronic trading in 1986, a tendency shared by many other stock exchanges of the time. In the course of the exchange’s history, it has shifted from serving a domestic market to a fully global one.

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The Hong Kong Stock Exchange is operated as a for-profit corporation, answerable to its shareholders. The highest level of decision-making is done by the exchange’s board of directors. For example, the board of directors decides what the objectives, strategies and business plan of the exchange will be. This has drawn some criticism by participants in the exchange. Some argue for a new regulatory body that does not have a commercial interest in the corporation.

By market capitalization, the Hong Kong Stock Exchange is the seventh largest in the world. Market capitalization is a measure of a corporation’s value based on the free-market price of all its shares. By trade value, on the other hand, the exchange is the 10th largest.

A building complex known as the Exchange Square has housed the Hong Kong Stock Exchange since the 1980s. It faces an uncertain future, however, regarding its relationship with rapidly-growing mainland China. Hong Kong has historically been known as an important finance center in the world, but the People’s Republic of China threatens to economically overshadow it in coming decades.

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