Signs for the Hong Kong Exchanges & Clearing Ltd. (HKEx) in Hong Kong
Justin Chin | Bloomberg | Getty 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 Minister Paul Chan told CNBC on Friday.
Chan said in his budget speech on Wednesday that the government would increase the stamp duty traded on listed shares from 0.1% to 0.13%. The announcement led to a sell-out in shares of the city’s stock exchange operator and the broader Hong Kong market.
“The Hong Kong market has done very well, very actively, the volume has risen quite a bit,” Chan told CNBC’s Emily Tan.
“Perhaps this is the time for us to increase the stamp duty a little, which will not harm our competitiveness and at the same time bring additional revenue to the government at this moment,” he added.
The finance secretary said Hong Kong authorities had launched various initiatives over the past few years to improve the competitiveness of the city’s stock market. This includes listing dual-class stock quotes and attracting Chinese companies to the U.S. to get a secondary listing in Hong Kong.
Hong Kong was one of the top markets for listings worldwide in 2020, 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 had 132 public offerings worth $ 32.1 billion, and 199 further offers worth $ 62.9 billion last year, according to data compiled by consultant PwC.
With such ‘robust’ capital market activities, raising the stamp duty Hong Kong could provide a ‘quick fix’ to increase its tax revenue in the short term, said Stanley Ho, a KPMG China advisory partner.
“However, it is also important for Hong Kong’s capital markets to remain competitive with the global financial markets, many of which tend to reduce or eliminate such duties,” Ho said in a statement after Chan’s budget speech.
Chan said he remains confident in the prospects of Hong Kong as an international financial center.
He explained that the government was working to promote Hong Kong as a center for sustainable and green financing, to further develop the city’s fixed income markets and to manage more activities in the asset and wealth sector.
Chan said Hong Kong was not the only one to have had a ‘downward adjustment’ to a previous run-up.
“I will therefore not mind temporary fluctuations in the market. What we believe is that we will continue to work hard to improve the supply of our market to further enhance the competitiveness and attractiveness of the Hong Kong market,” he said. he said.
“We will continue to attract the inflow of international capital.”