Hong Kong Financial Secretary Paul Chan (right) delivers the annual budget at the legislative council in Hong Kong on Feb 26, 2020. (ISAAC LAWRENCE / AFP)
Financial Secretary Paul Chan Mo-po repeated his contention on Monday that Hong Kong’s stock market will retain its competitive edge and appeal, despite his proposal to raise stamp duty on stock trades unnerving investors.
Once the stamp duty hike is implemented from Aug 1, the SAR government is expected to gain an extra HK$12 billion in revenue each year
Chan made the remarks in an exclusive interview on Chats with the radio host Heung Shu-fai, a radio show broadcast by Metro Broadcast Corporation on its Metro Finance channel, as Hong Kong stocks rebounded from last week’s turmoil.
The benchmark Hang Seng Index surged 1.63 percent, or 472.36 points, to close at 29,452.57 points on Monday, as the market entertained hopes of a fresh US stimulus package and hunted for bargains after a panic sell-off on Friday. The Hang Seng Tech Index soared 3.85 percent, or 344.35 points, to finish at 9,298.79 points.
On Wednesday, the city’s financial chief announced a plan to increase stamp duty to 0.13 percent from 0.1 percent for stock trading - the first hike since 1993 - under the budget for the 2021-22 fiscal year. The stamp-duty increase, which comes as the special administrative region government is struggling to plug a pandemic-induced record budget deficit of HK$257.6 billion, sent the Hang Seng Index below 30,000 points, while shares of the city’s exchange operator collapsed more than 11 percent at one point in Wednesday’s trading.
However, Chan said the stamp-duty hike will not inflict permanent damage on Hong Kong stock market’s status as magnet for global investors and promising companies.
“Except for stamp duty, we barely charge for any item in Hong Kong’s stock market,” Chan said. “The increase in the stamp duty mainly affects high-frequency trading, which has long been blamed for the growing market volatility. For retail investors, the impact should be negligibly small.”
Once the stamp duty hike is implemented from Aug 1, the SAR government is expected to gain an extra HK$12 billion in revenue each year. The extra revenue in the 2021/22 fiscal year from August 2021 to March 2022 will be as much as HK$8 billion, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu told a news conference on Thursday.
In another budget move, Chan proposed giving each adult HK$5,000 worth of electronic consumer vouchers to boost local spending.
Chan said on Monday that there is still room for discussion and study as to how the vouchers should be distributed, with the number of installments and how much should be in each installment. The goal, he pointed out, is to combine the policy target and the needs of citizens.
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