Hong Kong Raises Stamp Duty On Shares And Hang Seng Index Loses 30000 Points

A stone stirs a thousand waves!

On February 24, the financial secretary of the Hong Kong Special Administrative Region government, Mr. Chen maobo, announced in his budget that after fully considering the impact on the securities market and international competitiveness, he decided to introduce a bill to adjust the stamp duty rate on shares, which would increase from 0.1% of the transaction amount to 0.13% of the transaction amount.

He pointed out that he would continue to make every effort to implement various measures to develop the securities market, so as to bring Hong Kong's financial industry to a higher level. It is understood that the Hong Kong SAR government's proposal to increase stamp duty will take effect from August 1 this year, but it still needs to be approved by the Legislative Council. Government sources told the media that the move took into account the brisk trading in the stock market this year, as well as the financial capacity of investors. Assuming that the market conditions remain unchanged and the bill is passed immediately, an additional revenue of HK $12 billion will be generated each year.

In response to a press conference, Chen maobo said: "the cost is only one of the factors to consider whether a stock market is booming or not. It has experienced interconnection. In recent years, thanks to the economic development of the mainland, international investors have increased the allocation of the Chinese market. Under the mechanism of interconnection, Hong Kong stock transactions have entered a new stage. Hong Kong has further promoted the transaction of Hong Kong shares after amending the listing Ordinance. The government will continue to spare no effort to promote the development of the securities market and maintain its competitiveness. The proportion of this adjustment is not high, and the issue of maintaining market competitiveness has been considered. "

In fact, this is the first time that Hong Kong has raised the stamp duty on shares in 28 years, causing a sharp decline in the Hong Kong stock market. Chen maobo said frankly: "on February 24, the adjustment of the stock market is not just the Hong Kong market. There are adjustments in the region (other markets), and the stock market itself has fluctuations. We will pay close attention to the impact of the increase in stamp duty on fiscal revenue and the stock market."

According to the public data, the stock stamp tax revenue in the past three years exceeded HK $30 billion. In 2017 / 2018, 2018 / 2019 and 2019 / 2020, the stock stamp revenue was HK $36.9 billion, HK $33.1 billion and HK $33.2 billion, respectively. In the previous year, for example, stamp duty on shares accounted for about 5% of government revenue.

Market reaction is mixed

According to the data of the Hong Kong stock exchange, transactions of derivatives and exchange traded funds were not included from April to last month, with a cumulative turnover of more than HK $24 trillion. Based on this, the stamp duty on shares in the period may be as high as HK $48 billion.

Dai Zhijian, acting chief executive of the HKEx group, disclosed to the media on February 24 that the Hong Kong government had not consulted the HKEx in advance and was disappointed with the increase in the stamp duty on shares, but understood the government's approach. As of the end of the day, Hong Kong Stock Exchange (00388. HK) shares fell 8.8% to HK $509.

According to the performance data released by the Hong Kong Stock Exchange on the same day, the revenue and other income of the Hong Kong Stock Exchange in 2020 will reach HK $19.2 billion, up 18% year-on-year, and the net profit will reach HK $11.505 billion, up 23% year-on-year, both reaching a record high. Among them, the average daily transaction amount reached a record high, which led to the increase of transaction and settlement fees, which led to a 24% year-on-year increase in main business income. The revenue and other income of Shanghai Shenzhen Hong Kong stock connect reached a new high of HK $1.926 billion, a 91% increase compared with that in 2019.

He admitted that it was difficult to predict the impact of the move on trading at present, but he believed that the market did not need to overreact. "In addition to the cost of investment, the Hong Kong market has other attractions for investors, such as better quality companies and different types of new shares for investors to choose from."

In fact, there are different opinions on the increase of stamp duty in Hong Kong. According to the 21st century economic report, a number of organic legislators have proposed to the government to increase stamp duty. Zhong Guobin, a member of the Liberal Party, said that the stock market is more flexible than other investment markets, coupled with the global implementation of quantitative easing policy and the continuous inflow of "Beishui" into Hong Kong, the possibility of a large-scale shrinkage of the stock market is not high. The chairman of the New Democratic Party of Hong Kong, Mrs IP Lau Shu Yeh, believes that the simple and low tax system in Hong Kong will result in a limited increase in tax. She proposes to raise the stamp duty on stock transactions. I believe this will not affect the volume of trading and the listing of enterprises in Hong Kong.

Although the external environment is full of challenges, the trading volume of Hong Kong stock market increased significantly last year. According to the data, the average daily turnover of Hong Kong stock market in 2020 will reach HK $129.5 billion, up 49% year on year. During the same period, the initial public offering (IPO) raised HK $397.5 billion, an increase of 27% over the same period last year, of which the amount raised by mainland enterprises accounted for more than 90%.

Xia Chun, chief economist of Noah holdings, told the 21st century economic reporter: "Hong Kong's fiscal deficit this year is HK $300 billion. It is expected that there will be fiscal deficits in the next four years. Compared with the stamp duty on shares, there are more lethal capital gains tax, luxury car transaction tax and real estate profits tax. The stamp duty of 0.13% is actually the smallest. " "The impact of the increase in stamp duty on the stock market is mainly in the short term. Anti inflation assets will continue to improve with the economic recovery, after all, the easing of overseas funds will continue."

Guan Zhiping, member of the Greater China Tax Committee of the Australian Society of accountants, told the 21st century economic report: "as for the increase of stamp duty to 0.13%, due to the expected return of many Chinese capital stocks and the second listed enterprises this year, the Association believes that in the environment of abundant funds and low interest rates, the overall impact on the booming capital market and investors' investment intention is not significant When considering the growth rate, we should have considered the market's bearing capacity. "

China Thailand International analysts pointed out that at present, the transaction cost of Hong Kong stocks is about 0.25% + 0.1077% = 0.3577%. After the stamp duty is increased by 30%, the total transaction cost will rise to 0.3877%, about 8%, "due to the prevalence of procedural trading in recent years, the rising transaction cost will short-term hit the investment sentiment and affect the turnover rate of daily transactions. Some funds may be transferred to lower cost US stocks Excluding the withdrawal of funds from the south. But today's decline itself also adds to the market profit taking and the existing adjustment demand under the obvious transformation of new and old economic styles. "

As of the end of February 24, the Hang Seng Index fell 2.99% to 29718.24, while the Hang Seng technology index fell 5.1%. Trading volume of Hong Kong shares on that day exceeded HK $350 billion, a record high.

Zhang Huafeng, a member of the Hong Kong financial sector, told reporters: "the increase in the stamp duty on shares is tantamount to killing the chicken and laying the eggs. However, we also fully understand the economic situation of Hong Kong. Many industries are on the verge of closure and the government is facing unprecedented fiscal deficits. The rate of increase is lower than that suggested by some political parties, which reflects that the government has listened to the opinions of the industry and tried to minimize the impact on the market. "

Chen maobo said frankly that during the consultation period of the budget, he had received a lot of suggestions on levying new taxes. However, he said frankly that to introduce new taxes, we should consider the whole situation carefully and listen carefully to the opinions of the society. "At present, we focus on fighting the epidemic and revitalizing the economy, so we are not qualified to introduce new taxes. However, we will carry out relevant research and preparatory work, conduct in-depth discussions when appropriate, and seek consensus on the introduction of new taxes in order to increase revenue. "

Unemployment loans and e-consumption coupons were the first to be launched

Hong Kong's economy has been hit hard by the epidemic, and the public are looking forward to the annual budget.

Chen maobo announced a new budget, the cover is green, representing the hope for the future. He said that Hong Kong's economy contracted by 6.1% last year, the largest annual decline on record, and the first time Hong Kong's negative growth for two consecutive years. Meanwhile, the latest adjusted unemployment rate rose to 7%, a new 17 year high.

In response to the impact of the epidemic, the Hong Kong government has launched a number of large-scale anti epidemic support measures since last year, involving a total of about HK $300 billion, resulting in a record fiscal deficit. In the budget, more than HK $120 billion of counter cyclical measures have been announced.

"The projected deficit for the 2020 / 21 fiscal year is HK $257.6 billion, and the fiscal deficit for the next fiscal year is HK $101.6 billion, equivalent to 3.6% of GDP. It is expected that the deficit will continue for the next four years." He said.

It is generally believed that the unemployment rate in Hong Kong may continue to rise in the near future. In response, Chen maobo announced in the budget that the Hong Kong government would, for the first time, introduce measures such as personal unemployment loans and electronic consumption vouchers to boost the economy and ease people's difficulties.

It is reported that the Hong Kong SAR government will set up a "100% guaranteed personal ex gratia Loan Scheme" as a supplementary measure, with the government providing guarantee. The upper limit of the loan amount is six times of the average monthly income of the applicant during his working period, and the upper limit is HK $80000. In the first 12 months, only interest is required to be paid. After that, the principal and interest can be apportioned and repayable for up to five years. The annual interest rate is fixed at 1%. If the applicant repays in full and on time, the interest paid will be refunded in full. Freelancers can also apply if they prove that they have lost their income. The total amount insured by the government is HK $15 billion and the application period is six months.

At the same time, the Hong Kong government will issue 5 000 Hong Kong dollar e-tickets to eligible Hong Kong permanent residents and new arrivals aged 18 or above to encourage and stimulate local consumption. This measure is expected to benefit about 7.2 million people and involve a financial commitment of about HK $36 billion.

Huang Hancheng, chief executive of Meilian shop, told the 21st century economic report that the local retail industry will benefit from the government's distribution of consumption vouchers to the public, which is also good news for shops and properties. It is expected that the trend is expected to rise both in price and quantity. Among them, the biggest decline in the price of commercial properties, the rebound is expected to be the most significant. According to Huang Hancheng's expectation, this year's retail sales volume will increase from 40% to 50% year-on-year to 60-70% year-on-year, with the turnover of about 1700 to 1800, and retail sales of about HK $400 billion, up about 23% year-on-year.