English HKSI LE Paper 8 Pass Paper Question Bank (QB)

2CEXAM Mock Question
Licensing Examination Paper 8
16-Sep-19
19:48:12
1 What is the most important recommendations of The Davison Report? Topic 1
A Combination of four exchanges Chapter 1
B Establishment of SFC Section
C Establishment of HKMA QID 1603
D Extension of SEHK settlement period Ans B Hot
Exp The Davison Report recommended the development of an independent statutory regulatory body. As a
result of their review, the Securities and Futures Commission (“SFC”) was established as an independent
statutory body in 1989.
2 Exchanges in Hong Kong are listed in which of the following exchanges? Topic 1
A Hong Kong Futures Exchange Limited(HKFE) Chapter 1
B Stock Exchange of Hong Kong Limited(SEHK) Section
C Hong Kong Exchanges and Clearing Limited(Hex) QID 899
D Shanghai Stock Exchange Ans B Hot
Exp Hong Kong Exchanges and Clearing Limited (“Hex”) was listed its shares on the SEHK on 27 June 2000.
3 The duty of Securities and Futures Commission include: Topic 1
I. Execute Securities and Futures Ordinance
II. Monitor the exchanges
III. Ensure the fairness of securities trading
IV. License professionals in securities and futures industry
A I, II, III Chapter 1
B I, II, IV Section
C II, III, IV QID 898
D I, II, III, IV Ans D Hot
Exp The objectives of the SFC in relation to the securities and futures industry, as stated in the SFO, are to: (1)
maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the
industry; (2) promote understanding by the public of financial services including the operation and
functioning of the industry; (3) provide protection to the investing public; (4) minimize crime and
misconduct in the industry; (5) reduce systemic risks in the industry; and (6) assist the Financial Secretary
in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the industry.
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4 In the future, the advantage of the market for funds in Hong Kong doesn't include: Topic 1
A Geographically close to the mainland China Chapter 1
B Strong and robust financial infrastructure Section
C Accurate and effective financial regulation, rules and financial professionals QID 822
D Lower tax rate than the average globe but higher than China Ans D Hot
Exp Local tax rate is not the main concern because fund is tended to invest in many other countries.
5 Which of the following measures recommended by The Davison Report? Topic 1
I. The fundamental revision of SEHK and its management
II.an extension of SEHK settlement period to three days(T+2)
III. development of a central clearing system
IV.the development of an independent statutory regulatory body to ensure the integrity
B I, II, IV Section
C II, III, IV QID 1598
Exp Hay Davison and other professionals to review the constitution, management and operation of SEHK and
the regulatory bodies. The Davison Report recommended major reforms: 1) the fundamental revision of
SEHK and its management; 2) an extension of SEHK settlement period to three days; 3) development of a
central
clearing system; 4) a review of Hong Kong Futures Exchange Limited (“HKFE”); and 5) the development of
an independent statutory regulatory body to ensure the integrity of the market and the protection of
investors.
6 Which of the following measures is not recommended by The Davison Report? Topic 1
A The fundamental revision of SEHK and its management Chapter 1
B Shorten of SEHK settlement period to three days Section
C Development of a central clearing system. QID 1600
D The development of an independent statutory regulatory body to ensure the integrity Ans B Hot
Exp Hay Davison and other professionals to review the constitution, management and operation of SEHK and
the regulatory bodies. The Davison Report recommended major reforms: 1) the fundamental revision of
SEHK and its management; 2) an extension of SEHK settlement period to three days; 3) development of a
central
clearing system; 4) a review of Hong Kong Futures Exchange Limited (“HKFE”); and 5) the development of
an independent statutory regulatory body to ensure the integrity of the market and the protection of
investors.

7 Which of the following weaknesses of the Hong Kong stock market shown by Hong Kong's stock market Topic 1
crash in 1987:
I. The failure of self-regulation
II. Overpriced trading charge
III. Inadequate settlement system
IV. Inadequate regulation
B I, II, IV Section
C I, III, IV QID 1597
D II, III, IV Ans C Hot
Exp In 1987, as world equity markets crashed, the Hong Kong market suffered severely and showed some
major weaknesses, which included the failure of self-regulation, an inadequate settlement system and
inadequate regulation.
8 Hong Kong's first stock exchange was established in which of the following year? Topic 1
A 1891 Chapter 1
B 1921 Section
C 1947 QID 896
D 1986 Ans A Hot
Exp The first reported trading of equity securities in Hong Kong dates back to the mid 19th century. In 1891,
the first formalized stock exchange, the Association of Stockbrokers in Hong Kong, was established. This
was renamed the Hong Kong Stock Exchange in 1914.
9 Which of the following products is not traded by OTP-C? Topic 1
A Shares Chapter 1
B equity warrant Section 1
C Stock options QID 2001
D derivative warrant Ans C Hot
Exp The different securities traded on SEHK include: ordinary and preference shares, depositary receipts,
stapled securities, warrants, Callable Bull/Bear Contracts, equity-linked instruments (“ELIs”), unit
trusts/mutual funds and debt securities such as Exchange Fund Notes (“EFNs”).
10 Which of the following financial markets has the highest market capitalization? Topic 1
A NYSE Euronext (US) Chapter 1
B NASDAQ OMX (US) Section 1
C Japan Exchange Group QID 1602
D London Stock Exchange Group Ans A Hot
Exp NYSE Euronext has the highest market capitalization in the world.

11 The Stock Exchange of Hong Kong Limited(SEHK) are responsible for operating which of the following Topic 1
two stock markets?
I. Main board
II. Hang Seng index
III. China Enterprise index
IV. Growth Enterprise Market
A I, III Chapter 1
B I, IV Section 1
C II, III QID 897
D II, IV Ans B Hot
Exp There are generally two tiers of listing: (1) Main board listing: this refers to the main group of publicly
listed companies with proven profitability records and size to justify being publicly listed. An example is
the Main Board of the SEHK. (2) Second board listing: this generally caters for smaller companies that do
not qualify for main board listing. An example is the Growth Enterprise Market (“GEM”) in Hong Kong.
12 Which of the following assets are traded at Stock Exchange of Hong Kong Limited(SEHK)? Topic 1
I. Stock warrants
II. Derivative warrants
III. The Link Real Estate Investment Trust(The Link)
IV. The Tracker Fund of Hong Kong
B I, II, IV Section 1
D I, II , III, IV Ans D Hot
Exp The following assets can be traded at Stock Exchange of Hong Kong: Stock warrants; Derivative warrants;
The Link Real Estate Investment Trust(The Link); The Tracker Fund of Hong Kong.
13 Which of the following assets is not issued on the Stock Exchange of Hong Kong Limited(SEHK)? Topic 1
A Exchange fund notes Chapter 1
B Exchange-traded funds Section 1
C Stock options QID 368
D China bonds Ans D Hot
Exp Debt securities listed on the SEHK are issued by HKSAR Government and The Hong Kong Mortgage
Corporation Limited.
14 Stocks listed in the Main Board of the Stock Exchange of Hong Kong Limited(SEHK) have which of the Topic 1
following characteristics?
I. Larger size
II. Longer life since inception
III. Longer record of earnings
IV. More suitable for professional investors
D II, III, IV Ans A Hot
Exp Main board listing: this refers to the main group of publicly listed companies with proven profitability
records and size to justify being publicly listed. An example is the Main Board of the SEHK.

15 Stocks listed in the Growth Enterprise Market have which of the following characteristics? Topic 1
I. Higher investment risk
II. Larger size
III. Not necessary to have earnings record
IV. More suitable for professional investors
A I, II Chapter 1
B I, IV Section 1
C II, III QID 901
D I, III, IV Ans D Hot
Exp GEM offers new or small companies with growth aspirations an avenue to raise capital. It does not require
companies to have achieved a record of profitability as a condition of listing. Investment in GEM carries a
higher risk than that in the Main Board and the market caters primarily for professional and sophisticated
investors..
16 Until June 2016, what is the ranking of Hong Kong financial market in terms of market capitalization? Topic 1
A The second largest Chapter 1
B The third largest Section 1.1
C The fourth largest QID 1599
D The eighth largest Ans D Hot
Exp At June 2016, the Hong Kong equity market was the eighth largest in the world and the fourth largest in
Asia by market capitalisation, quoted in USD.
17 What is the main reason Hong Kong had a slow development in bond market? Topic 1
I. Hong Kong has a long history of budget surplus such that it has little need to issue government bonds.
II. Hong Kong has a more active stock market to absorb the majority of capital.
III. Government thinks debt securities are not suitable for general investors.
IV. Hong Kong Monetary Authority prohibits retail investors from securities trading.
A I, II Chapter 1
B II, III, IV Section 2
C I, III QID 462
D I, II, III, IV Ans A Hot
Exp With its consistent budget surplus, the HKSAR Government does not have any need to raise capital by
issuing debts. Thus, Hong Kong’s debt market has historically been illiquid and inactive when compared
to its equity markets.
18 Which of the following reasons leads to the development of bonds market slower than stock market? Topic 1
A In the long run, stocks have higher return than bonds. Chapter 1
B In the short run, stocks have higher return than bonds. Section 2
C Stocks have lower risk. QID 905
D Liquidity of stocks are higher. Ans A Hot
Exp Since debts have pre-determined cash flow stream-C, debt securities are also known as “fixed income”
securities. They have lower risk than equities under normal circumstances and thus have lower return
than equities.

19 What is the main reason that the development of debt market in Hong Kong was slower than that of Topic 1
security market?
A Because the potential of stocks is higher than that of bonds Chapter 1
B Investors in Hong Kong invests less Section 2
C Linked exchange rate regime limits the volatility of interest rate QID 902
D There was usually budget surplus in the HKSAR government. Ans D Hot
Exp With its consistent budget surplus, the Government of the Hong Kong Special Administrative Region
(“HKSAR Government”) does not have any need to raise capital by issuing debts. Thus, Hong Kong’s debt
market has historically been illiquid and inactive when compared to its equity markets.
20 Which of the following actions push the development of debt markets in Hong Kong? Topic 1
I. The Stock Exchange of Hong Kong Limited(SEHK) merged in 1986.
II. The issuance of exchange fund bill and exchange fund notes
III. The HKSAR government's Government Bond Programme
IV. The bond issuance of the Hong Kong Mortgage Corporation Limited(HKMC), Hong Kong Airport
Authority(HKAA) and the Mass Transit Railway Corporation(MTRC)
D II, III, IV Ans D Hot
Exp To develop the debt market, the Hong Kong Monetary Authority issues a number of debt securities on
behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange Fund Notes
(“EFNs”).In the 2009-10 budget speech, it announced the launch of a government bond programme. At
present, the maximum total outstanding balance under the programme is kept to HKD100 billion. Hong
Kong Mortgage Corporation Limited(HKMC), Hong Kong Airport Authority(HKAA) and the Mass Transit
Railway Corporation(MTRC) issue bonds as well.
21 The reason why the debt market in Hong Kong had a slow development doesn't include: Topic 1
A Bond trading in retail market is not active. Chapter 1
B There is no bond trading services in the Stock Exchange of Hong Kong Limited(SEHK). Section 2
C Local agencies usually have earnings. QID 904
D The government doesn't issue bonds. Ans A Hot
Exp Hong Kong’s debt market has historically been illiquid and inactive when compared to its equity markets.

22 Which of the following actions did the Hong Kong government take to boost the development of debt Topic 1
securities market?
I. The Hong Kong Monetary Authority issues different maturities of exchange fund bill and exchange fund
notes.
II. The market-making system is introduced into exchange fund bill and exchange fund notes to increase
liquidity.
III. Exchange fund bill and exchange fund notes can be listed on Stock Exchange of Hong Kong
Limited(SEHK).
IV. There is no restriction in foreign investors investing in local debt securities market.
Exp To develop the debt market, the Hong Kong Monetary Authority (“HKMA”) issues a number of debt
securities on behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange
Fund Notes (“EFNs”). To enhance secondary market liquidity, the HKMA has established an effective
market-making system for EFBs and EFNs. There are currently no restrictions on foreign borrowers
issuing and investing in the Hong Kong debt market, which has resulted in its internationalization. In an
effort to appeal to retail investors and to encourage the development of Hong Kong’s debt market, some
debt securities, EFNs and government bonds have been listed on the SEHK.
23 The factors which favour seller of put options include: Topic 1
I. The underlying stock price increases.
II. The volatility of the stocks increases.
III. The interest rate increases.
IV. The dividends increase.
A I, II Chapter 13
B I, III Section 1
C II, III QID 2344
D II, IV Ans B Hot
Exp If the underlying stock price increases, the value of the put options will decrease, which is in favour of the
seller of put options. If the volatility of the stock increases, the value of the put options will increase,
which is against the seller of put options. If the dividends increase, the value of put options will increase,
which is against the seller of put options.
24 What are the characteristics of the Hong Kong stock market? Topic 1
I. The 8th largest stock market in the world
II. Higher Liquidity
III. No debt securities trading
IV. The only stock market in China
A I, II Chapter 2
B I, IV Section 1
C II, III QID 1604
D II, IV Ans A Hot
Exp The key features of the Hong Kong stock market are: 1st largest by capital raised from initial public
offerings (“IPO”) in 2015; 4th largest market in Asia in 2013 by market capitalisation as at end June 2016;
8th largest market in the world by market capitalisation as at end June 2016; market covers all major
sectors; highly liquid market.

25 Which of the following is not classified by Hang Seng Indexes Company Limited? Topic 1
A energy Chapter 2
B materials Section 2
C industrial goods QID 1605
D banking Ans D Hot
Exp Companies listed on the Hong Kong stock market are classified into eleven market sectors, according to
the Hang Seng Indexes Company Limited: energy, materials, industrial goods, consumer goods, services,
telecommunications, utilities, financials, properties & construction, information technology and
conglomerates.
26 The main purpose for China to promote new securities laws in 1998 is Topic 1
A Increase liquidity Chapter 2
B Prevent insider trading Section 3
C be geared to international standards QID 1687
D Let mainland investors to invest foreign Ans B Hot
Exp In 1998, the government passed new securities laws to govern the emerging securities market, aiming to
increase the levels of disclosure and to prevent insider trading.
27 Which of the following statements about China's financial market is correct? Topic 1
I. China has two stock exchanges
II. A shares can only be traded by QFII investors or local Chinese investors
III. China Securities Regulatory Commission is responsible for monitoring China's securities market
IV. CSRC encourages speculation
A I, III Chapter 2
B II, III Section 3
C I, II, III QID 1696
D I, II, IV Ans C Hot
Exp Exchanges were established in Shenzhen and Shanghai. The exchange facilitates
the trading of A shares, which are purchased by local Chinese investors. In 1998, the
government passed new securities laws to govern the emerging securities market, aiming to increase the
levels of disclosure and to prevent insider trading. Also, China Securities Regulatory Commission is
responsible to monitor China's securities market.
28 Which of the following stocks are traded in the Shanghai Stock Exchange(SSE)? Topic 1
I. A share
II. B share
III. Red chip stocks
IV. H share
A I, III Chapter 2
B I, II Section 3
D I, II, IV Ans B Hot
Exp A share and B share are traded in the Shanghai Stock Exchange(SSE).

29 A shares are settled in Topic 1
A RMB Chapter 2
B HKD Section 3.1
C USD QID 1684
D Any currencies Ans A Hot
Exp A shares are purchased by local Chinese investors and settled in the local currency, RMB.
30 B shares traded in SSE are settled in Topic 1
A RMB Chapter 2
B HKD Section 3.1
C USD QID 1685
D Any currencies Ans C Hot
Exp B shares are open to individual or institutional foreign investors and settled in US dollars.
31 Which of the following can buy B shares? Topic 1
I. Foreign investors
II. Investors in mainland China
III. Companies in mainland China
IV. Foreign Institutions
A I, II Chapter 2
B I, IV Section 3.1
C II, III QID 1683
D II, IV Ans B Hot
Exp B shares are open to individual or institutional foreign investors and settled in US or HK dollars.
32 Which of the following can buy A shares? Topic 1
I. Foreign investors
II. Investors in mainland China
III. Companies in mainland China
IV. Foreign Institutions
A I, II Chapter 2
B I, III Section 3.1
C II, III QID 1682
D II, IV Ans C Hot
Exp A shares are purchased by local Chinese investors and settled in the local currency, RMB.
33 Shanghai-Hong Kong Stock Connect allows: Topic 1
A investors in Hong Kong to invest in A share in Shanghai. Chapter 2
B investors in Hong Kong to invest in B share in Shanghai. Section 3.1
C investors in Hong Kong to invest in A share in Shenzhen. QID 911
D investors in Hong Kong to invest in B share in Shenzhen. Ans A Hot
Exp Shanghai-Hong Kong Stock is open to all Hong Kong and foreign investors, including institutions and
individuals. Shanghai-Hong Kong Stock can be traded include the 180 index, the SSE 380 index
constituent stocks, and the Shanghai Stock Exchange listed A + H shares of the company stock.

34 Chinese A share is traded at which of the following exchanges? Topic 1
I. Shanghai Stock Exchange(SSE)
II. Shenzhen Stock Exchange(SZSE)
II. Stock Exchange of Hong Kong Limited(SEHK)
IV. Shanghai-Hong Kong Stock Connect Stock Exchanges
A I, II Chapter 2
B I, III Section 3.1
C II, III QID 910
D I, II, IV Ans A Hot
Exp A share and B share are traded in the Shenzhen Stock Exchange(SZSE) and the Shanghai Stock
Exchange(SSE).
35 Which of the following stocks are traded in the Shenzhen Stock Exchange(SZSE)? Topic 1
I. A share
II. B share
III. Red chip stocks
IV. H share
B I, II Section 3.2
D II, III, IV Ans B Hot
Exp A share and B share are traded in the Shenzhen Stock Exchange(SZSE).
36 B shares traded in Shenzhen Stock Exchange are settled in Topic 1
A RMB Chapter 2
B USD Section 3.2
C HKD QID 1686
D Any currencies Ans C Hot
Exp Shenzhen Stock Exchange was established in December 1990, and also trades in A and B shares. A
shares are traded and settled in the local currency (i.e. RMB) and B shares in Hong Kong dollars.
37 Why is that global market has an impact on the stock market in Hong Kong? Topic 1
A Because Hong Kong is an important entrepot. Chapter 3
B Because of the prosperous development in derivatives Section
C Because of the internationalization of RMB QID 914
D Because of globalization Ans D Hot
Exp There are other global and regional economic factors that affect Hong Kong’s financial markets. Some of
the major economic factors include the stability of regional economies and currencies and free trade
versus tariffs/quotas.


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2CEXAM Mock Question

Licensing Examination Paper 8

A Combination of four exchanges Chapter 1

B Establishment of SFC Section

C Establishment of HKMA QID 1603

D Extension of SEHK settlement period Ans B Hot

A Hong Kong Futures Exchange Limited(HKFE) Chapter 1

B Stock Exchange of Hong Kong Limited(SEHK) Section

C Hong Kong Exchanges and Clearing Limited(Hex) QID 899

D Shanghai Stock Exchange Ans B Hot

C II, III, IV QID 898

D I, II, III, IV Ans D Hot

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A Geographically close to the mainland China Chapter 1

B Strong and robust financial infrastructure Section

C II, III, IV QID 1598

D I, II, III, IV Ans D Hot

A The fundamental revision of SEHK and its management Chapter 1

B Shorten of SEHK settlement period to three days Section

C Development of a central clearing system. QID 1600

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C I, III, IV QID 1597

D II, III, IV Ans C Hot

C 1947 QID 896

D 1986 Ans A Hot

B equity warrant Section 1

C Stock options QID 2001

D derivative warrant Ans C Hot

A NYSE Euronext (US) Chapter 1

B NASDAQ OMX (US) Section 1

C Japan Exchange Group QID 1602

D London Stock Exchange Group Ans A Hot

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C II, III QID 897

D II, IV Ans B Hot

C I, III, IV QID 406

D I, II , III, IV Ans D Hot

A Exchange fund notes Chapter 1

B Exchange-traded funds Section 1

C Stock options QID 368

D China bonds Ans D Hot

C I, III, IV QID 900

D II, III, IV Ans A Hot

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C II, III QID 901

D I, III, IV Ans D Hot

A The second largest Chapter 1

B The third largest Section 1.1

C The fourth largest QID 1599

D The eighth largest Ans D Hot

B II, III, IV Section 2

C I, III QID 462

D I, II, III, IV Ans A Hot

C Stocks have lower risk. QID 905

D Liquidity of stocks are higher. Ans A Hot

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B Investors in Hong Kong invests less Section 2

C I, III, IV QID 903

D II, III, IV Ans D Hot

A Bond trading in retail market is not active. Chapter 1

C Local agencies usually have earnings. QID 904

D The government doesn't issue bonds. Ans A Hot

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C I, III, IV QID 464