Trading by local retail investors on the city's stock market last year dropped to the lowest level since records began in 1991, while the benchmark Hang Seng Index suffered its worst performance since the 1973 global market crash. The stock exchange said local retail investors represented just 26 per cent of the market for the year to September last year, down from 28 per cent a year earlier. This was the lowest since the bourse started collating the data in 1991. Institutional investors - including local and overseas fund managers as well as pension fund investors - were the major players, contributing 65 per cent of all trade last year. The rest was made up of overseas retail investors and brokers themselves. Kenny Lee Yiu-sun, the chairman of the Hong Kong Stockbrokers Association, said the market downturn amid the global financial crisis had discouraged local retail investors from trading shares. 'Fund managers have the obligation to trade for clients so they invest in any market situation. However, retail investors usually do not invest during a falling market,' Mr Lee said. The Hang Seng Index dropped 48.27 per cent last year, with total turnover declining 18.16 per cent to HK$17.6 trillion. Mr Lee said sliding turnover had cut commission income for the more than 400 stockbroking companies. The Securities and Futures Commission and the Hong Kong Exchanges and Clearing would also be hard-hit as they relied on fees investors paid on stock transactions. The SFC announced separately yesterday it had suffered a 69 per cent year-on-year drop to HK$217.20 million in its surplus for the quarter to December, down from HK$709.89 million. The decline stemmed mainly from a drop in levies collected from investors on share transactions to HK$293.34 million during the quarter under review, down 59 per cent from a year earlier. For the nine months to December, the commission's surplus stood at HK$877.44 million, down 42 per cent from a year earlier. The SFC's financial year started on April 1. 'When the HKEx announces its results in two weeks, it is likely to see declining profit as well,' Mr Lee said. Despite lower income, the SFC last night announced a one-off waiver of annual licence fees for more than 37,000 licensed brokers, fund managers and advisers from April 1. The move is expected to cost the commission HK$138 million in revenue. 'In these difficult times, we are all conscious of the effects of cost-cutting on employees,' SFC chief executive Martin Wheatley said. 'And we hope that this will help licensed entities continue to invest in their staff through training or other development activities.' Brokerage houses now pay an annual fee of about HK$4,740 for each corporate licence fee and responsible officer licence fee, and HK$1,790 for each junior staff. Mr Lee welcomed the commission's waiver, which he said would put brokerage houses under less pressure to lay off staff. The SFC also said it would hire an additional 29 full-time enforcement staff and would also offer one-year internships to 12 new graduates to help create jobs. The commission forecast that it would have a surplus of HK$697 million for the next financial year starting this April.