Beginner’s Guide to U.S. Stock Investing: Essential Account Opening and Trading Strategies for Hong Kong Investors

Summary: The US stock market is the largest in the world, and Hong Kong investors can open accounts with online brokers and participate with an entry threshold as low as a single share. This article covers US stock trading hours, account opening procedures, tax considerations, and key risk management points—essential knowledge for anyone interested in investing in US stocks.

A growing number of Hong Kong investors are turning their attention to the US stock market. The US is not only home to many of the world’s top companies, but it also boasts a market size, liquidity, and product diversity that far exceed the local market. For Hongkongers seeking to broaden their investment horizons, it is crucial to understand the basics of investing in US stocks. This article provides a practical beginner’s guide, covering market features, trading rules, account opening steps, and risk management.

The Appeal of the US Stock Market

The US stock market is one of the largest financial markets globally. The New York Stock Exchange (NYSE), NASDAQ Stock Market (NASDAQ), and the American Stock Exchange (AMEX) are the three main US exchanges, together holding a significant share of the world’s total market capitalization.

Low Entry Threshold

Unlike the Hong Kong market, US stocks have no “board lot” concept. In Hong Kong, trades are made in board lots, typically ranging from 100 to 2,000 shares per lot, making the minimum investment several thousand or even tens of thousands of Hong Kong dollars. US stocks can be purchased as little as one share, meaning even those with limited capital can buy shares in their chosen companies.

Wide Variety of Products

The number of listed companies in the US is vast, spanning sectors such as technology, healthcare, consumer goods, and energy. There are also thousands of Exchange Traded Funds (ETFs)—far more than available in Hong Kong—providing investors with exceptional diversity of choice.

US Stock Trading Hours and Rules

Knowing the trading hours is fundamental when investing in US stocks. Due to the time difference, US stock trading falls during the evening to early morning for Hong Kong investors.

Hong Kong Time Reference

The US observes daylight saving (summer) and standard (winter) time:

Daylight Saving Time (approximately March to November): 9:30 p.m. to 4:00 a.m. Hong Kong time

Standard Time (approximately November to March): 10:30 p.m. to 5:00 a.m. Hong Kong time

There is no lunch break—the market is open for continuous trading for about 6.5 hours. Some brokers also provide pre-market and after-hours trading windows, allowing trading beyond regular hours.

Trading and Settlement System

US stocks allow same-day trading (T+0)—stocks bought can be sold on the same day. Since May 2024, the US has adopted T+1 settlement, meaning that trades settle on the first business day after the transaction, which is quicker than the previous T+2 system.

Circuit Breaker Mechanism

The US market employs a circuit breaker mechanism. When the S&P 500 Index experiences significant volatility, trading will be halted as follows:

7% drop: trading is paused for 15 minutes

13% drop: trading is paused again for 15 minutes

20% drop: the market closes early for the day

This system is designed to prevent excessive panic and give investors time to regroup.

The Three Major US Indices

Investors often use three key indices to measure US market performance:

Dow Jones Industrial Average

The Dow Jones Industrial Average tracks 30 major blue-chip companies and is one of the oldest US stock indices, reflecting the state of the US industrial sector and economy.

S&P 500 Index

The S&P 500 Index includes 500 large US companies and is regarded as a critical gauge of the overall market. Its broad coverage means many investors use it as a reference for their portfolios.

NASDAQ Composite Index

The NASDAQ Composite Index is tech-heavy and includes many emerging technology companies, making it especially valuable for those watching the tech sector.

Account Opening Procedures for Hong Kong Investors

Opening a US securities account is now very straightforward for Hong Kong investors, with most brokers supporting a fully online process.

Choosing the Right Account Channel

Hong Kong investors can open US securities accounts directly with qualified brokers and start trading US stocks. Online brokers generally have lower trading costs than traditional banks.

Required Documents for Account Opening

Typically, you will need to provide the following:

A valid Hong Kong ID card

Proof of address from the last three months (such as a bank statement or utility bill)

W-8BEN form (to certify you are not a US tax resident)

The W-8BEN form is crucial for Hong Kong investors; completing it correctly exempts you from US capital gains tax. Most online brokers provide an electronic form during the account opening process.

Steps for Opening an Account

Choose a suitable brokerage platform

Submit your application using a mobile app or website

Fill in your personal details and upload the required documents

Complete the W-8BEN form

Wait for review (normally completed by online brokers within 1–3 business days)

Deposit funds and start trading

Tax Information on US Stocks

Hong Kong investors must understand relevant US tax regulations before investing.

Capital Gains Tax

Per US tax rules, non-US tax residents do not pay capital gains tax on profits from trading US stocks. This is a major advantage for Hong Kong investors, provided the W-8BEN form is correctly completed.

Dividend Withholding Tax

Dividends from US stocks are subject to a 30% withholding tax, deducted automatically when dividends are paid. Because Hong Kong and the US do not have a comprehensive tax agreement, this tax is generally non-refundable. This should be considered when selecting dividend-paying stocks.

Tip: If your investment strategy focuses on capital gains rather than dividends, the 30% dividend tax has limited impact. However, if you plan to hold high-dividend stocks long-term, be sure to factor in the after-tax yield.

Key Points in Risk Management

Investment always carries risks—US stocks are no exception. Below are some key risk factors to watch for:

Currency Risk

US stocks are denominated in US dollars. Although the Hong Kong dollar is pegged to the US dollar, some minor fluctuations still occur, and currency conversion costs will be incurred when converting HK dollars to US dollars.

Market Risk

There are no daily price limits in the US market, so stocks can experience significant volatility. While circuit breakers can pause trading amid extreme market swings, individual stocks may still be subject to sharp fluctuations.

Information Lag

As US stocks trade from evening to early morning Hong Kong time, investors might not always be able to monitor the market in real time. Make use of trading tools like limit orders and stop-loss orders to manage these risks. Investors can also keep track of real-time markets via Longbridge’s market data services.

Diversification

Do not put all your funds in one stock or sector. Spreading investments across different sectors or ETFs can effectively diversify risk. Learn more about investment product choices to build a balanced portfolio.

Frequently Asked Questions

How much capital do Hong Kong residents need to buy US stocks?

US stocks can be bought in single shares, so the minimum required depends on the share price. Some stocks trade for just a few US dollars, allowing investors to begin with a small amount of capital.

What are the costs of trading US stocks?

The main costs include brokerage commissions, platform fees, and US SEC fees. Each broker has a different fee structure; it’s best to review detailed fee information before opening an account.

Do I need to know English to invest in US stocks?

While listed company information is mostly in English, many brokers provide Chinese interfaces and research reports, lowering the language barrier. However, improving your English will help you gain a deeper understanding of your investments over time.

Conclusion

The US stock market gives Hong Kong investors opportunities to participate in the world’s leading companies, with low entry barriers and a vast range of products as key strengths. The account opening process is now very convenient, with online brokers making it easy to get started. However, before investing, you should fully understand trading rules, tax implications, and potential risks, and establish strong risk management practices.

Your choice of investment tools should depend on your objectives, risk tolerance, market views, and level of experience. Regardless of the tool, be sure you thoroughly understand how it works, its risk characteristics, and trading rules, and set up a robust risk management plan. You can learn more about investing through the Longbridge Academy or by downloading the Longbridge App.