HKEX posts stellar earnings for 2020

▶ Shares hammered by city’s proposed hike in transaction tax

Hong Kong Exchanges and Clearing ( HKEX), the operator of Hong Kong’s stock exchange, on Wednesday revealed record earnings for 2020, in the latest sign of the city’s resilience as a global financial hub despite the complicated global environment.

However, the stellar data failed to underpin the shares of HKEX, as an unexpected announcement of a local government plan for a 30- percent increase in the city’s stamp duty on stocks trading hammered the market. Industry observers have mixed views on the repercussions of the proposed tax hike.

HKEX’s net profits jumped 23 percent year- on- year to a record high of HK$ 11.5 billion ($ 1.48 billion) in 2020. Revenue and other income, cash market turnover, and bond connect and stock connect volumes all set new records.

The strong year was also attributed to a buoyant IPO market, with a good number of Chinese mainland- based companies seeking primary or secondary listings at the exchange.

“Looking ahead, global financial markets will continue to be shaped by the impact of the coronavirus pandemic, ongoing geopolitical tensions, US- China trade relations and the anticipated economic recovery,” HKEX said in a statement announcing the results, highlighting its “unique position as both a destination market and gateway” to Chinese mainland.

The local market got off a good start this year, buoyed by a continued influx of money via the stock connect scheme between the Hong Kong and the mainland bourses.

While the influx failed to offset the impact on HKEX shares of Hong Kong Financial Secretary Paul Chan Mo- po’s announcement about a government proposal to raise the stamp duty on stock transactions to 0.13 percent. The rate has been 0.10 percent since

September 2001.

HKEX shares plunged over 10 percent when the afternoon session began and closed down 8.78 percent. The Hang Seng Index shed nearly 3 percent to finish below 30,000 points.

The sell- off also sent panic through the A- share market, with the flagship Shanghai Composite Index losing 2 percent.

The tax hike proposal caught the market off guard, triggering a wild selloff and sending HKEX shares plunging, Wu Jinduo, head of fixed income at the research institute of Great Wall Securities, said.