Photographer: Paul Yeung / Bloomberg
Photographer: Paul Yeung / Bloomberg
Hong Kong unveiled the first stamp duty increase on equity transactions since 1993, causing a wide market sale of $ 7.6 trillion and sending shares of the city’s stock exchanges to the largest dip in five years.
The planned increase in the transaction fee to 0.13% from 0.10% was part of a series of new measures announced in the Hong Kong budget, which included increased spending to help residents withstand the pandemic. Even though the city’s economy has declined in the last year, stock prices and Fiscal value they grew amid a global market boom.
Hong Kong’s Hang Seng benchmark sank 2.6% local time to 13:41, driven by a 7.8% drop in Hong Kong Exchanges & Clearing Ltd. on Wednesday.
“The impact will be significant,” Kingston Lin, general manager of Hong Kong’s Canfield Securities asset management department, said before the announcement. “The market is doing very well and, of course, will bring more revenue to the government. But higher transaction costs will be a concern for exchange. ”
The government has announced spending measures of more than US $ 120 billion ($ 15.5 billion) to alleviate economic hardship for the city’s residents.
Increasing the stamp duty will help pay for increased expenses. In fiscal year 2019/20, the tax contributed with revenues of 33.2 billion US dollars.
The Hong Kong stock exchange said on Wednesday that profit rose 23% to a record US $ 11.5 billion in 2020, helped by a 60% increase in stock transactions.
“While we are disappointed with the Government’s decision to increase the stamp duty for share transactions, we recognize that such a tax is an important source of government revenue, “said an exchange spokesman. “HKEX looks forward to continuing to work closely with all stakeholders to stimulate the continued success, resilience, intensity and attractiveness of Hong Kong’s capital markets.”
| Financial year | Stock Trading Fee (Buy and Sell) |
|---|---|
| 1993-98 | 0.15% |
| 1998-2000 | 0.125% |
| 2000-2001 | 0.125% |
| 2001- now | 0.1% |
Frankie Yan, a spokesman for financial services at Professional Commons and an SFC licensee, said the increase could bring additional revenue of $ 10 billion to the government. But the cost of a $ 1 million transaction would be only about $ 300, he said.
“Given the intangible amount, it would not discourage investors’ intention to trade shares,” he said.
– With the assistance of Jun Luo
(Updates with market movements from the first paragraph.)