About 470,000 more Hong Kong people invested in financial products in the last two years but retail investors' knowledge needs improvement, a Securities & Futures Commission survey says.

Conducted September to November, the survey estimated retail participation in different investment products and measured retail investors' level of financial understanding.

Of the 5,210 people interviewed, 1,915 had invested in one or more products in the previous two years. This represented a participation rate of 36.8%, or about 2.1 million people, up from 29.8%, or about 1.63 million people, in a similar survey in 2003.

Hong Kong stocks were still the most popular investments with a participation rate of 28.3%, up from 23.8%. Managed funds (excluding MPF investments) ranked second. The participation rate nearly doubled to 18.1%.

Investor education

For the first time, the survey used seven multiple-choice and yes/no questions to test investors' level of financial understanding in some issues on basic investor rights and the most common investment tools.

The average score was 3.39 out of 7. The correct rate per question ranged from 40.4% in the question about equity-linked deposits to 53.2% in the question about voting rights.

The survey also reaffirmed the importance and need of investor education. Over 90% of retail and potential investors 'strongly agreed' or 'agreed' that the securities industry as a whole should do more to educate the public about how to make informed investment decisions.

Results thought-provoking

Commission Chairman Martin Wheatley said this was the commission's first attempt to measure retail investors' financial understanding.

"The results are thought-provoking and we may broaden the scope of questions when we do a similar exercise in the future," he said.

"As indicated in the survey, it is important for all parties - regulators, market operators, investment advisers, brokers and educators - to each play an appropriate role in increasing the financial knowledge of our retail investors."