By Zhao Xiaofeng
Hong Kong's First Five-Year Plan for 2026–2030 and the Chief Executive's 2026 Policy Address set out an ambitious programme for financial development. As the city expands its markets and strengthens its connections with Mainland Chinese and international capital, investors will encounter unfamiliar products and disclosures. Equipping them to understand these opportunities should become part of the development strategy. Investor knowledge can help financial innovation translate into better-functioning markets.
The two blueprints point in the same direction. The Five-Year Plan commits Hong Kong to strengthening its roles as an international asset and wealth management centre and an international risk management centre. The Policy Address sets out concrete steps: tokenised gold and other real-world assets, wider use of regulated stablecoins, more overseas listings, greater investment flexibility for MPF funds, and changes to specialist technology listing rules, including opportunities for aerospace enterprises. Many of these products will reach investors through digital platforms. They involve different valuation methods and risks, and their benefits will depend partly on investors' ability to interpret information and judge what an asset is worth.
Beyond Size: The Quality of Prices
Hong Kong's financial ambitions are often expressed in market size and capital flows. But a financial centre is also judged by the quality of its prices, and that depends on the people trading. Who will price a pre-profit aerospace company whose value rests on research milestones and cash runway rather than earnings? Who will check the reserves behind a stablecoin, or the custody and redemption rights behind a gold token? How will MPF members weigh new options against fees and risks?
When investors cannot answer these questions, prices drift from fundamentals and later reverse. Confidence suffers, and quality issuers find it harder to raise capital at fair valuations. The stakes are rising. Hong Kong's IPOs raised over HK$340 billion in the first eight months of this year, and technology stocks account for over 40 per cent of market liquidity.
Investor knowledge amplifies the blueprints by turning disclosure into accurate prices. Secretary for Financial Services and the Treasury Christopher Hui has said the aim is to elevate Hong Kong from a "corridor of capital" to a "destination of choice". Capital settles where prices are credible and investors understand what they own.
The Evidence: Knowledge Translates to Market Efficiency
Our research provides empirical evidence that such understanding directly impacts market prices. In "Knowledge is power: A field experiment in the Chinese and US stock markets", published in the Journal of Accounting and Economics, we examined whether investor education could reduce mispricing. Our final analysis covered 2,284 Mainland Chinese stocks and 2,387 US stocks.
Conducted in 2020, the experiment focused on accounting accruals, which explain differences between reported earnings and cash flows. A company may recognise revenue before receiving payment. Investors who overlook the distinction can overestimate the persistence of profits and overvalue shares. We distributed educational material through social media around earnings announcements, comparing stocks assigned to conceptual explanations, explanations with calculation methods and spreadsheet tools, and a control group receiving announcement reminders.
In both markets, education reduced accrual-related overpricing and subsequent price reversals. The clearest effects came from combining concepts with practical methods and tools. Conceptual explanations alone did not produce statistically significant effects across the full samples. Effects were stronger in stocks with greater retail participation and deeper engagement with the material, and remained evident the following year. The findings show that practical investor education can improve how markets incorporate public information, benefiting even those who do not receive the education by making prices more informative for everyone.
Putting Knowledge into Practice
Our evidence suggests that the more investors understand these products, the more accurately they will be priced and the more capital they will attract. To embed this knowledge into the market, there are four practical pillars to consider:
- Pairing Concepts with Tools
The most effective intervention in our study was a calculator, not a lecture. Hong Kong is already moving disclosure onto digital rails, with full adoption of ISSB sustainability standards by 2028 and a share of nearly half of global digital bond issuance. The same data can feed simple, free analytical tools — cash flow against earnings, accrual quality, peer comparisons — embedded in the trading apps and exchange pages where retail investors already are. The 2027 consultation on streamlining prospectuses offers a natural opportunity to make issuer data not only available but readily usable.
- Deploying "AI+ Investor Education" Across Digital Gateways
Delivery matters as much as content. The Policy Address promises more than 200 courses under "AI for All" by early 2028 and an 18-month AI upskilling campaign reaching some 40,000 employees. Financial education can ride on the same ambition and the same channels: short, timely, stock-specific content delivered through social media, licensed platforms and AI assistants. As the Government strengthens its defences against AI-generated fraud, better-informed investors are also the most resilient line of protection.
AI could also make such tools and content responsive to individual questions. Banking apps, brokerage platforms and MPF portals could embed tutors alongside disclosures, explaining unfamiliar terms and helping users explore calculations. For MPF members, this could mean seeing how fees compound over a working lifetime.
The expansion of GenA.I. Sandbox++ into securities, wealth management, insurance and MPF offers a setting for suitable pilots. Universities and financial institutions could develop applications grounded in verified materials. Platforms should identify sources, disclose assumptions and uncertainty, provide human support, and separate education from product promotion. Success should mean better understanding: an engaging answer that leaves someone confidently mistaken would defeat the purpose.
- Evaluating Rigorously and Sharing What Works
Whether these initiatives actually improve understanding can, and should, be tested. The Plan describes its approach as evidence-based, and investor education is unusually well suited to randomised evaluation, as our experiment shows. Hong Kong could become the jurisdiction that evaluates financial education the way medicine evaluates treatments and, through Wealth Management Connect and the Greater Bay Area, share what works with the Mainland's vast retail investor base. That would give "Finance + Livelihood" a concrete and exportable form.
- Strengthening Hong Kong's Role as an International Financial Interpreter
Hong Kong's international advantage also rests on its ability to explain markets across borders. Investors encounter differences in reporting practices, shareholder rights and business models that can complicate comparisons. Making these differences intelligible could become a distinctive service supporting both inward investment and Mainland capital going overseas.
Bilingual resources, including AI tools, should address the assumptions investors bring from their home markets. For renminbi bonds, for example, a familiar coupon rate may conceal an unfamiliar combination of currency exposure and interest-rate risk. Practical explanations could help investors evaluate the investment in the currency in which they ultimately spend or report returns.
Universities and professional bodies could work with exchanges and issuers to develop reliable comparisons and terminology. Such resources would help overseas listings reach a better-informed investor base and assist financial advisers serving clients across jurisdictions. Hong Kong could build a reputation for making unfamiliar markets understandable, supporting its role as a centre for international asset and risk management.
Knowledge as a Strategic Asset
The Five-Year Plan casts Hong Kong as a "super connector" and "super value-adder" between the Chinese Mainland and the world. In finance, the value Hong Kong adds is trust in its prices. The liquidity facilities, gold infrastructure and tokenisation platforms now being built will strengthen that trust. Investing in what investors know can reinforce it further, at modest cost: it improves market efficiency, protects small investors and raises the quality of the capital market at the same time.
Knowledge, it turns out, is power. Counting it among Hong Kong's strategic assets would be a fitting way to bring the first Five-Year Plan to life.
The author is an Associate Professor of the Department of Finance at Lingnan University.
The views do not necessarily reflect those of DotDotNews.
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