Signage for the Hong Kong Exchanges & Clearing Ltd. (HKEx) in Hong Kong
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Hong Kong’s plan to increase stamp duty on stock trading will not hurt the competitiveness of the city’s financial markets, Financial Secretary Paul Chan told CNBC on Friday.
Chan said in his budget speech on Wednesday that the government will increase stamp duty on listed shares from 0.1% to 0.13%. The announcement triggered a sell-off of shares of the city’s stock exchange manager and the wider Hong Kong market.
“The Hong Kong market is doing very well, very active, volumes are up quite a bit,” Chan told CNBC’s Emily Tan.
“So maybe this is the time for us to increase stamp duty just a little bit, which will not hurt our competitiveness and at the same time bring additional revenue to the government,” he added.
The financial secretary said Hong Kong authorities have taken several initiatives in recent years to increase the competitiveness of the city’s stock market. That includes allowing listings of dual-class stocks and attracting US listed Chinese companies to seek secondary listing in Hong Kong, he said.
Hong Kong was one of the top listing markets worldwide in 2020 as Chinese companies such as e-commerce giant JD.com and gaming company NetEase raised money through secondary listings.
In all, the city’s stock exchange saw 132 IPOs worth $ 32.1 billion and 199 other offerings worth $ 62.9 billion last year, according to data collected by consulting firm PwC.
With such “robust” capital market activity, raising Hong Kong’s trade stamp duty could provide “a quick fix” to increase its tax revenues in the short term, said Stanley Ho, a corporate tax advisory partner at consulting firm KPMG China.
“However, it is also important for Hong Kong’s capital markets to remain competitive with global financial markets, many of which are tending to reduce or eliminate such tariffs,” Ho said in a statement following 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 develop the city’s fixed income markets and encourage more activity in the wealth and asset management sector.
Speaking on the stock market sell-off following his announcement of the tax hike, Chan said Hong Kong was not alone in experiencing a “downward adjustment” after an earlier run-up.
“So I would not suffer from temporary fluctuations in the market. We think we will continue to work hard to improve our market offerings in order to further increase the competitiveness and attractiveness of the Hong Kong market,” he said.
“We will continue to attract international capital inflows.”