Hong Kong revealed its first stamp duty increase in stock trading since 1993, triggering a broad sale in the $ 7.6 trillion market and sending shares on the city’s stock exchange to its biggest drop in more than five years.
The planned increase in trade tax from 0.10% to 0.13% was part of a series of new measures announced in the Hong Kong budget, which included increased spending to help residents cope with the pandemic. Even with the city’s economy plummeting last year, stock prices and volume of business emerged amid a global market boom.
Hong Kong’s Hang Seng benchmark sank 2.6% at 1:41 pm local time, led by a 7.8% decline in Hong Kong Exchanges & Clearing Ltd. Wednesday.
“The impact will be significant,” said Kingston Lin, managing director of the asset management department at Canfield Securities in Hong Kong, before the announcement by the city. “The market is doing very well and will certainly bring more revenue to the government. But the higher transaction costs will be a concern for the switch ”.
The government announced spending measures of more than HK $ 120 billion ($ 15.5 billion) to alleviate the economic hardship of city residents.
Increasing the stamp duty will help pay for increased spending. In the 2019/20 fiscal year, the tax contributed HK $ 33.2 billion in revenue.
The Hong Kong Stock Exchange said on Wednesday that profit rose 23% to a record HK $ 11.5 billion in 2020, helped by a 60% jump in stock trading.
“While we are disappointed with the government’s decision to increase the stamp duty for stock transactions, we to recognize that such a rate is an important source of government revenue, ”said a foreign exchange spokesman. “HKEX looks forward to continuing to work closely with all of its stakeholders to drive the continued success, resilience, vibrancy and attractiveness of Hong Kong’s capital markets.”
|Financial year||Stock trading stamp fee (buy and sell)|
Frankie Yan, a financial services spokesman for Professional Commons and a SFC licensee, said the increase could generate additional HK $ 10 billion in revenue for the government. But the cost of a HK $ 1 million deal would be only about HK $ 300, he said.
“Given the immaterial quantity, this would not discourage investors’ intention to trade in shares,” he said.
– With the help of Jun Luo
(Updates with market movements in the first paragraph.)