2 Brokers That Let You Buy Fractional Shares

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In Hong Kong, investors are used to having to buy whole “lots” of shares. This tends to mean investing a significant sum of money in one go.

For example, if you wanted to buy one lot of Tencent Holdings Ltd (SEHK: 700) shares, you’d have to spend around HK$44,200 at its current price of HK$442.40. That’s because one “lot” for Tencent is 100 shares.

These tend to differ from stock to stock in the Hong Kong market. However, for stocks listed in the US, you have always been able to buy single shares.

However, what’s even better now is that you can buy fractional shares in the US. This effectively means you can purchase, say, 0.2 shares of Amazon.com Inc (NASDAQ: AMZN) instead of having to buy one whole share which costs US$2,600.

For investors based in Hong Kong, this of course means being able to buy fractional shares of all US-listed companies, including many of the Chinese ADRs we’re familiar with.

So, with that, here are two brokers that investors in Hong Kong can use to buy fractional shares.

1. Interactive Brokers

Interactive Brokers (NASDAQ: IBKR) is actually a listed stock trading platform and is well-known among the international investing community for offering low-fee and easy equity trading across multiple markets.

Better yet, it also allows investors in Hong Kong to set up a trading account with no minimum deposit amount. With that, fractional share trading is offered for US-listed stocks. One highlight is that you can set a dollar amount to invest and Interactive Brokers will buy however many shares of a particular stock that amount can purchase.

Commissions are generally low for trading in US markets – US$0.005 per share purchased with a minimum of US$1 per trade. Trades involving US-listed Exchange-Traded Funds (ETFs) are commission-free.

Rates are also extremely competitive for the local Hong Kong market. Large local banks such as HSBC and Hang Seng Bank are notorious for charging high commissions on stock trades for both US and Hong Kong.

For example, HSBC charges investors 0.25% of the transaction value with a minimum of HK$100 per trade. Compare that to Interactive Brokers which charges 0.08% of the transaction value with a minimum of just HK$18 per trade.

2. SoFi Hong Kong

SoFi Hong Kong is a relative newcomer to the Hong Kong market. Backed by its San Francisco-based parent, SoFi Hong Kong is looking to grow its customer base, particularly among millennials in their 20s and 30s.

The demographic tends to be underserved by the market and SoFi Hong Kong was formed after it acquired the start-up 8 Securities.

The trading platform offers users zero commission trading for both US and Hong Kong stocks. It looks to improve the user experience of stock trading by taking a mobile-first approach.

Sofi Hong Kong is licensed and regulated by the Securities & Futures Commission of Hong Kong. The company plans to introduce fractional share trading to its offering some time this year.

Foolish takeaway

For investors who are looking to buy fractional shares, Interactive Brokers right now offers the easiest option.

However, with SoFi planning to launch its own fractional share trading service this year, investors who are comfortable with a mobile-first approach could look to it as a viable alternative to trade some of their favourite stocks listed in the US.

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