February 14, 2025
Finance chief warns that reducing Hong Kong’s stamp duty on securities trading is not a silver bullet for sluggish stock market

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“There has been a demand in the market to reduce stamp duty, but data has shown that no amount of reduction can address structural issues and encourage business in the long run.”

He warned the efforts were doomed to failure: “Any piecemeal stimulus measures will not only fail to boost the market, but will further undermine investor confidence.”

Last Tuesday, the government appointed securities regulator veteran Carlson Tong Ka-shing to look into the liquidity of the stock market, including examining the listing regime, market structure and trading mechanism, in a bid to boost the city’s status as a global financial hub. Task force announced under leadership.

Chen blamed Western media bias when reporting on Hong Kong and the inability of investors to visit the city during the COVID-19 pandemic for an apparently unclear picture of the financial hub’s situation.

He said he would promote Hong Kong by visiting Europe and the US, while the city would host a series of conferences and summits in the coming months. The Financial Secretary’s office said it would announce Chan’s travel plans when appropriate.

“I will personally describe the advantages and opportunities of ‘one country, two systems’ [governing principle] brought to Hong Kong, and the city’s latest developments including innovation and technology, green tech, green finance and Web 3,” he said.

Chan, who was not among the officials approved by Washington at the announcement of the national security law in 2020, became the first senior member of Chief Executive John Lee Ka-chiu’s administration to visit the United States amid ongoing US-China tensions. were going to be The visit follows US Commerce Secretary Gina Raimondo’s visits to Beijing and Shanghai last week.

The office also said the US should do its duty as host of the upcoming Asia-Pacific Economic Cooperation summit in November by inviting Li to attend. Washington has been ambiguous about inviting Li, who is under US sanctions.

Locally, Hong Kong Fintech Week will be held in October, followed by an investment summit of global financial leaders in November. The Saudi Arabia-based Future Investment Initiative Institute will host the Priority Asia Summit in December.

Chan said the task force will draw on the knowledge and work of financial veterans and regulatory experts to review the advantages and challenges of the stock market and formulate strategies in the short, medium and long term.

The members will meet for the first time this week, he said.

Following mainland China’s surprise decision to cut stamp duty by 0.05 percent last week to boost stock market trading, some local stockbrokers, as well as financial sector lawmaker Robert Li Wai-wang and executive council convener Regina Ip Lau Suk-yee advocated a similar strategy for Hong Kong.

In 2021, the city raised stamp duty on trade value for buyers and sellers on all share transactions from 30 per cent to 0.13 per cent, the third increase since 1998.

Financial Secretary Paul Chan says reducing stamp duty on securities trading will not boost the stock market. Photo: Yik Yeung-man

Chan pointed out that during the early months of growth in 2021, between August and December, the average daily turnover of securities trading rose 2 percent year-on-year.

The turnover rate is projected to increase from 0.22 per cent in 2020 to 0.27 per cent in 2022, he said, with higher rates indicating more active trading of shares.

Chan said stock-trading activities were influenced by geopolitics and market sentiment.

“The task force will review external and internal factors such as listing regime, market structure and trading mechanism, study how to broaden sources of funding and funding streams, attract more quality enterprises to float in the stock market, Investment products should be innovated and promoted. The turnover rate of the stock,” Chan said.

Hong Kong will ‘select financial veterans’ for new stock market task force

He said investor interest also depends on fundamentals like business performance and potential of the companies.

Exco convenor IP, who is also a lawmaker, said that reducing stamp duty alone will not change the market, but the move will boost investor sentiment and show that the government is responsive.

“I understand the Finance Secretary is concerned about the revenue loss, but there will be less market trading [also] Reduce stamp duty revenue,” she said.

“The government needs to adopt other macroeconomic measures to kickstart the economy, not just issue more consumption vouchers.

“The stamp duty cut is significant as the central authorities has halved its stamp duty on stock transactions, which means that buying H shares is more expensive than A shares.”

H shares are shares of mainland-incorporated companies listed in Hong Kong. The securities of such companies listed on mainland exchanges are known as A shares and are denominated in yuan.

Hong Kong eyeing task force to improve stock market liquidity: John Lee

Lawmaker Lee, who is a member of the new task force, said he stood by his call to cut stamp duty, but admitted it would not solve all the issues faced by the market.

“Reducing the stamp duty rate as a short-term measure to bring a positive message to the market is the mainstream expectation of the industry, but it cannot address all the challenges brought by high interest rates and geopolitics.”

The government has estimated that reducing stamp duty to 0.1 percent or zero would cut government revenue by HK$12.3 billion and HK$53.1 billion, respectively, for the fiscal year. Photo: Yik Yeung-man

Lee said he believes the government ultimately prioritized its financial health.

His comments match those of a source close to the government, who told the Post that the authorities would not reduce stamp duty as it could hurt public finances.

“Paul Chan will certainly not agree to reduce stamp duty as it is a significant contributor to government income,” said the source.

The government estimated, based on actual stamp duty rates in 2022-23, that reducing the rate to 0.1 percent or zero would cut government revenue by HK$12.3 billion and HK$53.1 billion, respectively, which is about 2 percent or 9 percent. of the total revenue in that year.

Economist Terence Chong Tai-leung, executive director of the Chinese University’s Institute of Global Economics and Finance, said the government had to achieve fiscal balance and avoid deficits as set out in the Basic Law, the city’s mini-constitution.

Source: amp.scmp.com

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