Signage for Hong Kong Exchanges & Clearing Ltd. (HKEx) in Hong Kong
Justin Chin | Bloomberg | fake images
Hong Kong’s plan to increase the stamp duty on stock trading will not hurt the competitiveness of the city’s financial markets, Finance Secretary Paul Chan told CNBC on Friday.
Chan said in his budget speech on Wednesday that the government will increase the stamp tax paid on listed stock trading from 0.1% to 0.13%. The announcement sparked a sell-off of shares in the operator of the city’s stock exchange and the broader Hong Kong market.
“The Hong Kong market has been doing very well, very active, the volume has gone up quite a bit,” Chan told CNBC’s Emily Tan.
“So maybe this is the time for us to increase the stamp tax a bit, which will not hurt our competitiveness and at the same time bring additional revenue to the government at this juncture,” he added.
The finance secretary said Hong Kong authorities have launched various initiatives in recent years to improve the competitiveness of the city’s stock market. That includes allowing dual-class shares to be listed and enticing US-listed Chinese companies to seek a secondary listing in Hong Kong, he said.
Hong Kong in 2020 was one of the top markets for listings globally, as Chinese companies such as e-commerce giant JD.com and gaming company NetEase raised funds through secondary listings.
In total, the city’s stock exchange recorded 132 initial public offerings worth $ 32.1 billion and 199 additional offerings worth $ 62.9 billion last year, according to data compiled by consulting firm PwC.
With such “robust” activity in the capital markets, increasing the trade stamp tax may offer Hong Kong “a quick fix” to increase its tax revenue in the short term, said Stanley Ho, a partner in corporate tax advice at the consultancy. KPMG China.
“However, it is also important that Hong Kong’s capital markets remain competitive with global financial markets, many of which tend to reduce or eliminate such tariffs,” Ho said in a statement after Chan’s budget speech.
Chan said he remains confident in Hong Kong’s prospects as an international financial center.
He explained that the government is working to promote Hong Kong as a center for sustainable and green finance, further developing the city’s fixed income markets and encouraging more activity in the asset and wealth management sectors.
On the stock market sell-off after his announcement of the business tax increase, Chan said Hong Kong was not the only one to experience a “downward adjustment” after a previous increase.
“Therefore, I would not be bothered by temporary fluctuations in the market. What we believe is that we continue to work hard to improve our market supply to further enhance the competitiveness and attractiveness of the Hong Kong market,” he said.
“We will continue to attract the entry of international capital.”