About 51% of stock investors refer to financial reports when making trading decisions, the Securities & Futures Commission Stock Investor Survey has found.

Conducted from September to February, the survey studied the behaviour of 500 retail investors in stock investments, and the factors they considered in picking stocks and making trading decisions.

About 51% said they referred to financial reports when making stock trading decisions, while 48.4% relied on company announcements.

Nearly the same proportion of stock investors counted on stock commentators' recommendations on television, radio or newspapers (48.2%) and media reports (47.6%) for investment decisions.

When asked about their understanding of a listed company before buying its shares, 76% of stock investors said they knew about the company's business nature, 67.2% had monitored the stock's price trend and 65% were interested in the company's prospects. About 27% knew about the company's management and only 16.4% understood the treatment of minority shareholders.

Stock performance

When reviewing the performance of their stock investments in a defined six-month period, 53.4% of stock investors said they made profits, 21.4% suffered losses, 0.2% broke even and 25% said they did not know or were not sure.

While there was no statistically significant difference between the amount of profit made by stock investors who read financial reports and that made by those who did not, stock investors who did not read financial reports suffered a bigger trading loss (25.2%) than those who did (16%).

Commission Chairman Martin Wheatley said it is important for investors to do their homework to analyse the company's fundamentals before committing their money.

"The survey reveals that many stock investors rely on media reports and stock commentators' recommendations in making trading decisions. Investors must be aware that given the constraints in airtime or column space, the assumptions behind investment research reports and recommendations are often not included. Nor have those recommendations taken into account the personal circumstances of individual investors. Investors should consider carefully whether those recommendations are suitable for them."