HKEX Lowers Trading Threshold Again: Minimum Stock Quotation Unit Reduced by 50%, Enhancing Value for Hong Kong Stock Investors

On August 3, 2026, the Hong Kong Stock Exchange officially implemented the second phase of the reduction in minimum price increments, marking another historic adjustment to the "minimum quotation unit" in the Hong Kong stock market. According to the HKEX announcement, for securities priced between HKD 0.5 and HKD 10, the minimum price increment was reduced by 50% from HKD 0.01 to HKD 0.005. This measure, which follows the first phase reform on August 4, 2025, is another cost-reduction and efficiency-enhancement initiative by the HKEX, viewed by the market as an important signal for the continuous optimization of the micro-trading mechanism in Hong Kong stocks. What is a "Minimum Price Increment"? Understanding the HK Stock Quotation Mechanism For investors new to the Hong Kong stock market, the "Minimum Price Increment" (i.e., the smallest price change unit) is the first lesson in understanding HK stock trading rules. Unlike A-shares, which commonly use "fen" as the minimum quotation unit, the Hong Kong market sets different minimum change units based on the stock price range; generally, the higher the stock price, the larger the minimum change unit. For example, stocks in the HKD 0.5 to HKD 10 range previously had a minimum price jump of HKD 0.01 per quote, which is 1 fen. This seemingly minor mechanism directly affects transaction costs and execution efficiency. The bid-ask spread (the gap between the buying price and the selling price) is directly related to the minimum quotation unit: the smaller the quotation unit, the narrower the bid-ask spread can theoretically be, and the lower the hidden cost for investors in the process of "buying low and selling high." For high-frequency traders and market makers, this figure directly impacts their operational space. Second Phase Reform Implemented: Doubling the Quotation Precision for HKD 0.5 to HKD 10 Securities According to documents released by the HKEX, the scope of securities covered in the second phase adjustment is consistent with the first phase, covering various securities such as stocks, Real Estate Investment Trusts (REITs), and warrants. However, Exchange Traded Products (ETPs), bonds, exchange-traded options, and structured products (including bull/bear certificates and derivative warrants) are not included in this adjustment, and the minimum price increment for these securities remains unchanged. Core Adjustments: Securities in the HKD 0.5 to HKD 10 range have their minimum price increment reduced from HKD 0.01 to HKD 0.005, a 50% reduction; Applicable to: Various securities such as stocks, REITs, and warrants; Effective Date: August 3, 2026 (Phase one was implemented on August 4, 2025). The HKEX stated that reducing the minimum price increment brings four benefits to the market: first, reducing transaction costs, as a smaller increment helps narrow the bid-ask spread; second, improving trading efficiency, making it easier for orders to execute at the expected price; third, optimizing the price discovery mechanism, allowing the price to more accurately reflect the actual value of the security; and fourth, enhancing international competitiveness, further solidifying Hong Kong's position as an international financial center. Significant Achievements of Phase One: 35% Narrowing of Bid-Ask Spreads and 30% Faster Order Matching Reviewing the first phase of reforms, the Stock Exchange of Hong Kong (SEHK) adjusted the minimum tick size for stocks priced between HKD 10 and HKD 20, and between HKD 20 and HKD 50, from HKD 0.02 to HKD 0.01, and from HKD 0.05 to HKD 0.02, respectively. SEHK data shows that as of July 4, 2026, nearly a year into the first phase implementation, the average bid-ask spread for the affected stocks narrowed by 35%, and the average order matching time decreased by 30%, demonstrating significant effectiveness. Yiu Ka Yan, Deputy CEO and Co-CEO of the SEHK Group and Co-Head of Markets, stated that the SEHK is committed to increasing the vitality and liquidity of the Hong Kong stock market by introducing various market microstructure enhancement measures, and "we are delighted to take a significant step on the path of reducing minimum tick sizes." Liu Bik Yan, Chief Operating Officer of the SEHK, also introduced that since the first phase of bid-ask spread narrowing began last August, the bid-ask spread in the Hong Kong securities market has significantly narrowed, transaction costs have decreased, and overall liquidity has improved. A Panorama of Hong Kong Stock Market Reforms in 2026: More Than Just Quotation Mechanisms In fact, the reduction of the minimum tick size is only one part of the SEHK's series of reforms in 2026. Reviewing the measures implemented throughout the year reveals a clear main theme: "reducing costs, improving efficiency, and aligning with international standards": * June 9: Optimization of T+1 futures trading rules after market close. The daily price fluctuation limits for six major index futures contracts, such as Hang Seng Index futures and Hang Seng Tech Index futures, were expanded from ±5% to ±6%, releasing price discovery capabilities; * June 30: Implementation of the per-lot trading unit optimization reform. The lower limit of the per-lot value was reduced from HKD 2,000 to HKD 1,000, and the number of shares per lot across the entire market was standardized to eight specifications, lowering the entry barrier for retail investors; * August 3: The second phase of minimum tick size reform officially took effect, further improving quotation precision; * Ongoing throughout the year: The Unmanned Securities Market (USM) will go live on November 16, 2026; consultation for the spot market settlement cycle reduction from T+2 to T+1 has commenced, expected to be implemented in the fourth quarter of 2027. Chen Yuxuan, a non-bank analyst at Huatai Securities, believes that the above measures reshape the micro-trading mechanism of the Hong Kong stock market, significantly improving market operating efficiency and effectively lowering investment barriers and optimizing market mechanisms. Liao Bo, Chief Macroeconomic Analyst at Northeast Securities, pointed out that the expansion and optimization have enhanced the price elasticity of the futures market, enabling a rapid reflection of supply and demand changes, helping investors adjust positions during volatile periods, and curbing malicious market speculation. What Does This Mean for Investors? A "Cost Accounting" For ordinary investors, the most direct feeling from the reforms is the reduction in transaction costs. Taking stocks priced around HKD 5 as an example, after the minimum bid-ask spread was reduced to 0.01 HKD and the quotation precision was improved to 0.005 HKD, market makers and high-frequency traders have more room to narrow the spread, leading to a decrease in the hidden transaction costs for retail investors. This change is particularly tangible for investors who trade frequently and engage in short-term operations. More importantly, more granular quotes help the price more accurately reflect the actual value of securities, optimizing the price discovery mechanism and reducing price distortion caused by "single-tier orders." Coupled with the reduced entry barriers from the reform of per-hand trading units, the friendliness of the Hong Kong stock market to small and medium-sized investors is systematically increasing—this is one of the latest answers to "why invest in Hong Kong stocks." Vietnamese Investor Perspective: Why the "Cost-Effectiveness" of Hong Kong Stocks Continues to Improve? For Vietnamese investors and funds focusing on overseas allocation, the signal significance of the Hong Kong stock market reforms cannot be overlooked. As a core hub connecting the mainland and global capital markets, the Hong Kong market offers a "dual exposure" of internationalized systems and high-quality assets: on one hand, the Stock Connect mechanism allows mainland capital to continuously flow south, providing ample liquidity to the market; on the other hand, Hong Kong hosts numerous leading companies in Chinese technology, consumption, and new energy, as well as regional Southeast Asian targets, offering outstanding allocation value. In the past period, Vietnamese capital has deployed in the Hong Kong market through various channels, such as fund private accounts, direct investment in Hong Kong stocks, and Vietnam-themed ETFs listed in Hong Kong. The continuous optimization of the Hong Kong stock trading mechanism means that international investors can enter and exit this market with lower costs and higher efficiency. From a more macro perspective, Tung Yik-ting, CEO of the Stock Exchange of Hong Kong, previously revealed that the exchange will continue to deepen reforms, expanding blue-ocean businesses such as fixed income and commodities, enriching the product system, and attracting more international capital deployment—providing broader choices for emerging market capital, including that from Vietnam. Risk Warning and Participation Advice Of course, every market carries risks. Hong Kong stocks operate on a T+0 trading system, and some varieties have large fluctuations. Market sentiment is intertwined with international capital flows and geopolitical factors, and short-term volatility can be very intense. For Vietnamese investors, before participating in Hong Kong stocks, they should fully assess their own risk tolerance. It is recommended to open accounts through legitimate licensed channels, prioritize leading stocks or index funds with sufficient liquidity to diversify risks, strictly avoid blindly chasing gains or selling in panic, and closely monitor the impact of exchange rate fluctuations on investment returns. Conclusion From the narrowing of the initial buy-sell spread by 35% to the doubling of quote accuracy in the second phase, the Stock Exchange of Hong Kong is reshaping the market microstructure with "meticulous craftsmanship." For investors who view Hong Kong stocks as a global allocation window, the continuous decrease in systemic costs undoubtedly makes this "bridge" to China and Asian growth dividends smoother. Whether the reform dividends can translate into market vitality still requires time to verify, but the direction is clear: Hong Kong stocks are becoming more efficient, friendlier, and more attractive.