Photographer: Paul Yeung / Bloomberg
Photographer: Paul Yeung / Bloomberg
Hong Kong unveiled its first stamp duty increase on stock trading since 1993, triggering a wide market sell-off of $ 7.6 trillion and sending the city’s stock into its biggest plunge in more than five years.
The planned increase in the trade tax from 0.10% to 0.13% was part of a series of new measures announced in Hong Kong’s budget, including increased spending to help residents weather the pandemic. Even as the city’s economy has fallen over the past year, stock prices are and revenue have risen amid a boom in the world market.
Hong Kong’s benchmark Hang Seng Index fell 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, director of the asset management division at Canfield Securities in Hong Kong, prior to the city’s announcement. “The market is doing very well and that will of course generate more income for the government. But higher transaction fees will be a concern for the exchange. “
The government announced spending of more than HK $ 120 billion ($ 15.5 billion) to ease the economic hardship for city residents.
The increase in stamp duty will help pay for the increased expenditures. In fiscal year 2019/20, the levy contributed HK $ 33.2 billion in revenue.
The Hong Kong Stock Exchange said on Wednesday that earnings are up 23% in 2020 to a record HK $ 11.5 billion, helped by a 60% jump in stock trading.
While we are disappointed with the government’s decision to increase the stamp duty on stock transactions, we recognize that such a charge is an important source of government revenue, ”said a spokesman for the exchange. “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 | Stamp duty on stock trading (buy and sell) |
|---|---|
| 1993-1998 | 0.15% |
| 1998-2000 | 0.125% |
| 2000-2001 | 0.1125% |
| 2001 – now | 0.1% |
Frankie Yan, a financial services spokesperson at Professional Commons and an SFC licensee, said the increase could bring the government additional revenues of HK $ 10 billion. But the cost for a HK $ 1 million transaction would only be about HK $ 300, he said.
“Given the intangible amount, it would not discourage investors’ intention to trade stocks,” he said.
– With the help of Jun Luo
Updates with market movements from the first paragraph.