HK’S trading tax hike pummels stocks

HONG KONG: Hong Kong unveiled its first stamp-duty increase on stock trades since 1993, sparking a broad selloff in the $7.6 trillion market and sending shares of the city’s exchange to their biggest plunge in more than five years.

The planned trading-tax increase to 0.13% from 0.10% was part of a raft of new measures announced in Hong Kong’s budget that included increased spending to help residents weather the pandemic.

Even as the city’s economy has plunged over the past year, stock prices and trading have surged amid a global market boom.

Hong Kong’s benchmark Hang Seng Index closed 3% lower yesterday, led by a 8.8% tumble in Hong Kong Exchanges & Clearing Ltd.

That’s even after the bourse operator reported record annual earnings yesterday.

Mainland-based funds sold a record Us$2.6bil worth of Hong Kong stocks through exchange links with Shenzhen and Shanghai.

That comes after 38 days of net purchases from north of the border.

Calvin Tai, HKEX interim chief executive officer, said in an earnings call that the bourse operator wasn’t consulted by the government on its decision to hike the stamp duty.

“The impact will be significant,” said Kingston Lin, managing director of the asset management department at Canfield Securities in Hong Kong, ahead of the announcement by the city.

“The market is doing very well and, of course, it will bring more revenue to the government. But higher transaction costs will be a concern for the exchange.”

The government announced spending measures of more than Hk$120bil (Us$15.5bil) to alleviate economic hardship for city residents struggling after a two-year economic recession.

The trading tax hike is due to be in place on Aug 1 and the government expects it to generate an extra HK$12 billion a year, local media including Apple Daily and NOWTV reported, citing unidentified people. In the 2019/2020 fiscal year, the duty contributed Hk$33.2bil in revenue. —