The increase in Hong Kong’s stock trading taxes was a “convenient catalyst” that helped spur a healthy correction for city markets, says Tim Moe of Goldman Sachs.
The government announced in its budget on Wednesday that the stamp duty on stock transfers will increase from 0.1% to 0.13%.
The move sparked a strong sale in the broader markets on Wednesday, but stock prices rebounded partially on Thursday.
The Hang Seng index rose about 1.5% in Thursday afternoon trading, after dropping about 3% the day before.
Meanwhile, Hong Kong Exchanges and Clearing saw further losses as it fell by around 1.4%, falling further after falling more than 8% from the previous day. HKEX operates the city’s stock exchange and on Wednesday reported an annual increase of more than 20% in its 2020 profit attributable to shareholders.
“I think it’s important to note that the overall increase, I mean, it looks like 30% is a big number, but it’s actually 3 cents out of every hundred dollars worth of trading – it’s hardly the only or sufficient fundamental reason for people to make a decision investment, “said Moe, co-director of Asia macro research and chief Asia Pacific equity strategist at the U.S. investment bank.
Our view is that the stamp duty increase was a kind of convenient catalyst for a market that was doing very, very well.
Timothy Moe
Chief Asia Pacific Stock Strategist Goldman Sachs
“Our view is that the stamp duty increase was a kind of convenient catalyst for a market that had done very, very well. It is probably a little bit above your skis in terms of positioning, evaluation and we had what you can call a healthy fix, “he told CNBC’s” Squawk Box Asia “on Thursday.
Despite Wednesday’s sharp losses, the Hang Seng index is still more than 9% higher in the year, until Wednesday’s close.
In January, Moe told CNBC that investors from mainland China contributed significantly to Hong Kong’s “very strong start” in 2021.
Looking ahead, the Goldman Sachs strategist said that Hong Kong markets are likely to continue their upward trajectory as soon as this sales period narrows.
“What we would see is a kind of healthy cleaning from some overly extended positioning, some of the favorite big-property shares sold,” said Moe. “We think that, once we overcome this type of positioning, the market … may continue to see some upward gains this year.”
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