Does legal protection matter to investors in Hong Kong? : a preliminary survey of investor sentiments

Hong Kong (HK) is a small territory, yet its size is dwarfed in comparison with its standing as an international financial centre in the Asia Pacific area. In 2010, 11 of the top 25 publicly listed companies on the HK Stock Exchange were based in the People's Republic of China (PRC). Four of the top five were PRC companies.1 PRC companies in HK should therefore be as attractive as HK companies are to HK investors. One may therefore infer that HK investors should be equally enthusiastic about investing in PRC companies listed in the PRC. Yet, in a recent survey of over 50 HK and PRC based investors, they overwhelmingly preferred to invest in the HK stock market rather than in the PRC counterpart. This article aims at examining the reasons behind such a mismatch in interest, as well as finding ways to improve investors' confidence in PRC listed companies.