Signage for Hong Kong Exchanges & Clearing Ltd. (HKEx) in Hong Kong
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Hong Kong’s plan to increase the stamp duty on stock trading will not harm the competitiveness of the city’s financial markets, Finance Secretary Paul Chan told CNBC on Friday.
Chan said in his budget speech on Wednesday that the government will raise the stamp duty paid on listed stock negotiations from 0.1% to 0.13%. The announcement prompted a liquidation of shares in the operator of the city’s stock exchange and the wider Hong Kong market.
“The Hong Kong market is doing very well, very active, the volume has gone up a little bit,” Chan told Emily Tan of CNBC.
“So, maybe it is time to increase the stamp tax a little, which will not harm our competitiveness and at the same time bring additional revenues for the government in this situation”, he added.
The finance secretary said Hong Kong officials have launched different initiatives in recent years to increase the competitiveness of the city’s stock market. This includes allowing listing of shares of two classes and attracting Chinese companies listed in the U.S. to seek a secondary listing in Hong Kong, he said.
Hong Kong in 2020 was one of the main markets for global listings, as Chinese companies like e-commerce giant JD.com and gaming company NetEase raised funds through secondary listings.
In total, the city’s stock exchange saw 132 initial public offerings worth $ 32.1 billion, and 199 other offers worth $ 62.9 billion last year, according to data compiled by consultancy PwC.
With this “robust” activity in the capital markets, raising the trademark tax could offer Hong Kong “a quick fix” to increase its tax revenue in the short term, said Stanley Ho, corporate tax adviser partner at KPMG China .
“However, it is also important for Hong Kong’s capital markets to remain competitive with global financial markets, many of which tend to reduce or remove such taxes,” said Ho in a statement after Chan’s budget speech.
Chan said he remains confident of Hong Kong’s prospects as an international financial center.
He explained that the government is working to promote Hong Kong as a center for green and sustainable finance, further developing the city’s fixed income markets and encouraging more activity in the asset and wealth management sectors.
On the stock market liquidation after his announcement of the trade tax hike, Chan said Hong Kong was not the only one to undergo a “downward adjustment” after a previous run.
“So, I would not be bothered by temporary fluctuations in the market. What we believe is that we continue to work hard to improve our market offerings to further increase the competitiveness and attractiveness of the Hong Kong market, ”he said.
“We will continue to attract international capital inflows.”