Research proposal: Evaluating the suitability of the Hong Kong stock exchange versus the Singapore stock exchange as a destination for the Chinese companies going public

Rationale for the project

The Hong Kong stock exchange (HKSE) and the Singapore stock exchange (SSE) operate in open economies even though the HKSE has remarkably outperformed its Singapore counterpart in the recent past (The Wall Street Journal, 2011). The research shall therefore aim at answering the question of how suitable the HKSE is for Chinese companies opting to go public as compared to the SSE. This shall, among other factors explain the reason for HKSE’s relative popularity among Chinese investors. Some of the companies to be taken into consideration include China Mining Company, LongRun Tea, and Ten Fu’s Tea (Chinese Tea Files, 2010). The project is interesting as it entails in-depth examination of investors and the market systems affecting the HKSE and the SSE. Previously acquired knowledge on market efficiency and general operations of stock markets will be useful in executing this project. This project will provide a unique platform where investor sentiments are considered alongside empirical data, unlike most studies conducted in the past. Moreover, the research shall compare two stock markets that have rarely been directly compared in a comprehensive study in recent times.

Theoretical framework

Most studies conducted in relation to the topic have mainly concentrated on proving the efficient market hypothesis on the HKSE and the SSE (Law, 2010; Chen, 2007). This project shall use the market efficiency hypothesis and examine other factors to complete the project.

 Methodology

The governing research philosophy to be applied shall be the realist philosophy. Both secondary and primary data collection methods shall be engaged and analysis shall be both quantitative and qualitative. Qualitative analysis shall be used to capture investor sentiments while quantitative analysis shall be used to test market efficiency in order to explain any observed investor preferences. The underlying assumption shall be that market efficiency and other factors affect investors’ preference for a stock market. Market efficiency envisions a scenario where all information in the market is available to all investors hence limiting the ability of particular investors to make superior returns due to information asymmetry. Market efficiency is tested using the movement of prices of stocks taken over time and tested for the possibility of generating abnormal returns. Where abnormal returns can be generated, the stock market is said to be inefficient. The main data to be used shall be empirical data (mainly for HKSE and SSE online databases) that shall be tested accordingly. Investor perspectives shall also be captured through a well designed survey.

Project Structure

The structure shall be: Chapter 1: introduction, research objectives, rationale; Chapter 2: literature review; Chapter 3: methodology; Chapter 4: results; Chapter 5: analysis and interpretation; Chapter 6: conclusions and recommendations.

For more theory and case studies on: http://expertresearchers.blogspot.com/

References

Chen, S.H., 2007. Adaptive Market Hypothesis: The Case of Hong Kong Stock Exchange, Literature Review. (Online) Available at: http://www.coverthehedge.com/thesis/Literature%20Review.pdf (Accessed 9 April 2011)

Chinese Tea Files, 2010. Trend: Chinese Companies are going Public. (Online) Available at: http://www.chineseteafiles.com/2010/09/11/trend-chinese-tea-companies-are-going-public/ (Accessed 9 April 2011)

Law, C., 2010. A Test of the Efficient Market Hypothesis with respect to the recent behavior of the Hong Kong Stock Market. (Online) Available at: http://www.ide.go.jp/English/Publish/Periodicals/De/pdf/82_01_05.pdf (Accessed 9 April 2011)

The Wall Street Journal, 2011. SGX- A Prescription for Growth. (Online) Available at: http://blogs.wsj.com/exchange/2011/03/14/sgx-a-prescription-for-growth/ (Accessed 12 April 2011)