Hong Kong Financial Secretary Warns Lowering Tax May Not Revive City’s Stock Market

Hong Kong’s Financial Secretary Paul Chan Mo-po cautioned in his weekly blog on Sunday that merely lowering the tax on securities trading would not necessarily breathe new life into city’s lethargic stock market, and added that piecemeal measures could be counterproductive.

This is his first comment on the much-discussed topic of stamp duty on securities since the formation of a 13-member task force last week. The task force, headed by securities regulatory veteran Carlson Tong Ka-shing, is set to conduct a comprehensive review of the factors responsible for the lackluster performance of the stock market and devise appropriate measures to rectify its structural issues.

Citing an 8% decline in the benchmark Hang Seng Index in August, and a daily average turnover of HK$100 billion (US$12.7 billion), Chan highlighted in his blog that the Hong Kong stock market’s performance is far from ideal.

“There are calls in the market for reducing the stamp duty, but statistics have shown that any reduction cannot address structural issues and stimulate turnover over the long run,” Chan wrote, warning that partial stimulus measures might not only fail to revitalize the market but could also further erode investors’ confidence.

The establishment of the task force was announced by the government last Tuesday, with its mandate being to examine stock market liquidity, scrutinize the listing regime, market structure, and trading mechanism, all in a bid to reinforce the city’s standing as a global financial center. The stock exchange is managed by the Hong Kong Exchanges and Clearing, which is also tasked with vetting listing candidates.

Chan expressed confidence that the task force, drawing upon the expertise of financial heavyweights and regulatory specialists, would assess the stock market’s strengths and challenges and formulate strategies for the short, medium, and long term. He added that the task force members would convene for the first time this week.

The Financial Secretary’s remarks came in the wake of mainland China’s abrupt decision last week to halve the stamp duties rate to 0.05% on its stock exchanges, a move that prompted some local stockbrokers, financial sector lawmaker Robert Lee Wai-wang, and Executive Council convenor Regina Ip Lau Suk-yee to advocate for a similar approach in Hong Kong.

Chan, however, pointed out that despite a 30% hike in stamp duty to 0.13% in 2021, the average daily turnover of securities trading rose by 2% year-on-year between August and December of that year. He further noted that the stock turnover rate had increased to 0.27% in 2022, up from 0.22% in 2020, indicating more active trading. He attributed the fluctuations in stock-trading activities to geopolitical factors and market sentiment.

“The task force will review external and internal factors such as the listing regime, market structure, and trading mechanism, study how to broaden sources of funding and funding streams, attract more quality enterprises to float on the stock market, innovate investment products, and boost the turnover rate of stocks,” Chan concluded.

Sponsored Links by DQ Promote



Send this to a friend