Introduction

In this HKSI topic walkthrough, we walk through five exam-style questions that touch on regulatory licensing, core trading infrastructure, and investment strategies. Rather than merely listing the answers, we unpack the underlying concepts and connect them to how professionals in the Hong Kong market analyze and operate. Whether you’re revising for the HKSI or simply strengthening your understanding of market mechanics, these scenarios illustrate the kind of reasoning you’ll encounter on the exam and in real life.

Question 1: Virtual asset management licensing in Hong Kong

A hypothetical asks whether Wiki Company can engage in asset management services involving virtual assets, and which statement is correct.

• The correct answer is: D. You should notify the SFC because this would be considered a significant change to Wiki’s business.
• Why not A, B, or C?
  • A is incorrect: there is no single, catch-all "licence for virtual asset businesses." Regulatory licensing depends on the actual nature of the activity and the securities/commodities framework involved.
  • B is incorrect: simply because a virtual asset is not deemed a security by the SFC does not automatically remove licensing or regulatory obligations; other rules or licenses may apply depending on the activity.
  • C is incorrect: this introduces an unsupported condition about historical activity and unspecified prohibitions.

HKSI takeaway: In Hong Kong, regulatory changes or expansions of business lines related to virtual assets generally require notification to or approval from the Securities and Futures Commission (SFC). The key is recognizing when a change constitutes a material/major change in the regulated business.

Question 2: Trading time, systems, and settlement

Mr. Liao instructs his broker to sell 10,000 shares of a stock at 11:30 at $50.2 or higher. Which systems would this trade use?

• The correct answer is: A. I (Central Settlement System) and II (OTP-C).
• Why?
  • The Hong Kong Exchange’s trading system is OTP-C for securities trading.
  • The clearing and settlement of trades on the Exchange take place through the Central Clearing and Settlement System (CCASS). Although the question’s terminology here uses “Central Settlement System,” the essential point is that trading occurs on OTP-C and is settled via CCASS.

HKSI takeaway: You should distinguish between the trading platform (OTP-C) and the clearing/settlement infrastructure (CCASS). This pairing is fundamental for understanding post-trade flows in HK markets.

Question 3: Investment approach from macro to micro

Miss Kong starts from macroeconomic factors (exchange rates, interest rates, consumer confidence), then determines the best asset allocation and finally selects industries and stocks likely to benefit. This investment approach is:

• The correct answer is: C. Top-down (由上而下).
• Why? From broad macro views to sector and stock selection, this method begins with the macro picture and narrows down to the micro level.

HKSI takeaway: The top-down approach emphasizes macro fundamental analysis first, followed by sector and stock-level analysis, contrasting with bottom-up approaches that start at company-specific fundamentals.

Question 4: Stock plus call option strategy

An investor buys a stock at $30 and then buys a call option with a strike of $35. Which intention is most likely?

• The correct answer is: A. Speculation.
• Why? If an investor believes the stock will rise, purchasing a call option alongside buying the stock is a bullish, speculative move on the expectation of upward price movement.

HKSI takeaway: Buying a call option in conjunction with owning the underlying stock is a classic speculative strategy, reflecting a directional bet on price movement rather than a pure hedging or risk-limiting strategy.

Question 5: Hedging with futures

Mr. Yen, a cautious parent, believes the Australian dollar will rise and buys AUD futures to prepare for his daughter’s study abroad. He is most likely:

• The correct answer is: C. Hedger.
• Why? The aim is to lock in future exchange rates to protect against adverse price movements, which is the essence of hedging.

HKSI takeaway: Hedging with futures is a risk-management technique used to mitigate exposure to currency risk or other price risks, rather than to speculate on price direction.

Final thoughts

These five questions connect regulatory concepts (licensing and notification), market infrastructure (trading and settlement systems), and investment strategies (top-down analysis, speculation, and hedging) that are central to HKSI understanding. By breaking down each scenario, you can better recognize how the HKSI syllabus translates into real-world applications and exam-style reasoning.

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