① Hong Kong's “Policy Address” continues to make big moves. Reducing stamp duty on Hong Kong stocks is the focus, but the increase in Hong Kong stocks narrowed, and the Hong Kong Stock Exchange fell by more than 4%; ② Ren Zhigang, former CEO of the Hong Kong Monetary Authority, believes that there may not be much market reaction in the short term, but as long as structural problems are solved, the market can develop healthily.
Finance Federation, October 25 (Reporter Cheng Mengqi)Today, Li Jiachao released his second “Policy Address” after taking office. The “combo punch” of restarting the capital investment entry plan, lowering the stamp duty on Hong Kong stocks, reforming the GEM, “removing the spice” of the property market, and encouraging childbearing is dazzling. Some shareholders said, “There are too many big moves to count.”
However, the performance of Hong Kong stocks was clearly not “bought.” The Hang Seng Index opened nearly 3% higher this morning, and the Hang Seng Technology Index opened nearly 5% higher. After 11:00, with the publication of the “Policy Address”, the increase in the Hang Seng Index declined. In the end, the Hang Seng Technology Index rose by only 0.6% throughout the day, the Hang Seng Technology Index rose 2.2%, the National Index rose 0.9%, the market turnover was 95.472 billion yuan, and the Hong Kong Stock Exchange fell more than 4%.
Why did Hong Kong stocks open sharply but their gains continue to narrow?
Why did Hong Kong stocks open sharply higher today, but with the publication of the “Policy Address”, the increase continues to narrow?
Industry insiders pointed out that the collapse of Hong Kong's stock market this morning was mainly fueled by last night's favorable news, including that at the invitation of US Secretary of State Brinken, Foreign Minister Wang Yi will visit the US on October 26, and China will approve an increase of 1 trillion yuan in treasury bonds for 2023. Today, Hong Kong's “Policy Address” announced a reduction in stock stamp duty, from the current 0.13% payment by each buyer and seller to 0.1% according to the transaction amount. The goal is to complete the legislative process by the end of November. These measures will help the liquidity of Hong Kong stocks, and the “reduction” of property ownership will benefit the development of the Hong Kong property market.
“The new Policy Address has introduced many positive policies on the economic side. I believe it will help Hong Kong's overall market develop healthily when the economy improves. However, the current market sentiment is still very affected by external factors, including geopolitics. The measures proposed in the Policy Address may not see much market response in the short term, but I believe that as long as structural issues are resolved, the market can develop healthily.” Ren Zhigang, former chief executive of the Hong Kong Monetary Authority, said.
However, the Hong Kong Securities and Futures Professional Association believes that the reduction in stamp duty on Hong Kong stocks is of no avail, and that the tax rate is still far higher than other major financial centers. It is believed that it will be difficult to attract overseas capital into the Hong Kong stock market. The government should further reduce or even abolish stock stamp duty to increase market liquidity. I believe this will also help attract more domestic and foreign companies to list in Hong Kong.
Stamp duty on Hong Kong stocks became the focus of attention in the “Policy Address”
The “Policy Address” continues to make big moves. Among them, the one that has received the most attention is the adjustment of stock stamp duty. Li Jiachao announced that stamp duty on Hong Kong stock transactions will be reduced from 0.13% to 0.1%. The HKSAR Government plans to complete the legislative process by the end of November.
It is worth noting that this is the first time in 22 years that the Hong Kong government has lowered stock stamp duty. The last reduction occurred on September 1, 2001, when the stock stamp duty was reduced from 0.1125% to 0.1%, while the last increase was in August 2021, where the stamp duty rate increased from 0.1% to 0.13%.
In response, Chairman Shi Mellen of the Hong Kong Stock Exchange said that reducing stamp duty on stock market transactions will help reduce transaction costs. This move, along with other measures, will lay out a strategic layout for the Hong Kong market to seize major future opportunities. The CEO of the Hong Kong Stock Exchange, the European Union Champions League, believes that these measures will help reduce transaction costs and attract more investors to participate in the Hong Kong capital market, thereby increasing the liquidity and depth of the market. The Hong Kong Stock Exchange will also continue to promote a series of other medium- to long-term strategic initiatives already under planning, including further optimizing the listing mechanism and market infrastructure, and enriching the Hong Kong Stock Exchange's product ecosystem.
Why doesn't the market buy it? How is the performance after the stamp duty has been reduced over and over again?
How has the market reacted after Hong Kong stocks have reduced stock stamp duty over time? According to statistics from Cathay Pacific Junan, stamp duty on Hong Kong stocks was lowered three times, respectively in April 1988, April 2000, and September 2001. Most industries were boosted up on the first trading day of the 2000 cut, but within the next 20 trading days, the industries that had risen in the previous period then turned down; after the April 7, 2000 downturn, the industries with the highest increase in T+10 generally began to pull back, while industries with small increases in the previous period began to make up for a slight increase; on the first trading day after the downgrade on September 1, 2001, most industries still fell.
According to CITIC Construction Investment's latest research report, the short-term impact of stock transaction stamp duty adjustments on market trading activity is limited, but there is a clear upward trend in medium- to long-term Hong Kong stock turnover. Overall, stamp duty on stock transactions is only one factor affecting investor confidence and trading behavior, and cannot have a decisive influence on market trends; however, macroeconomic growth prospects, market liquidity levels, and profit quality of listed companies are the fundamental factors that determine stock market trends in the medium to long term.
However, as a more mature capital market, the Hong Kong stock market may still maintain a structure dominated by institutional investors in the future. If stamp duty on stock transactions can be reduced to a certain level, it may attract more investors of various types, such as quantitative transactions and high-frequency transactions, to participate in Hong Kong stock trading, thus further enhancing the richness of the Hong Kong stock market ecosystem and the level of market liquidity.
The property market, maternity, and investment immigration are “revitalizing” the Hong Kong market
In addition to lowering stamp duty, in order to improve the liquidity of Hong Kong stocks, the Hong Kong government will also successively implement a series of measures such as reducing information fees, reforming the GEM market, and reviewing trading price differences. The Hong Kong government has also requested the Hong Kong Securities Regulatory Commission and the Hong Kong Stock Exchange to study and implement recommendations such as maintaining trading in bad weather, and plans to promote renminbi-denominated trading of Hong Kong stocks.
Furthermore, there are many measures in the “Policy Address” to bring “living water” to the Hong Kong market.
Hong Kong will restart the “Capital Investor Entry Scheme”. Eligible investors who have invested HK$30 million or more in stocks, funds, bonds and other assets (excluding real estate) in Hong Kong can apply to enter Hong Kong through the scheme to enhance the development advantages of Hong Kong's asset and wealth management, finance and related professional services sectors. Details will be announced within this year.
On the property market side, stamp duty on new homes in Hong Kong will be cut in half, and stamp duty on foreign talent purchases will be “exempted first, then levied later”. The three spicy measures were reduced simultaneously. Chen Yongjie, vice chairman of the Asia Pacific region of Central Plains Real Estate and president of the Housing Department, welcomed the policy report to reduce the intensity of the property market, believing that the relevant measures would help the overall flow of the property market, but under the premise that spicy taxes still exist, the reduction in price will not cause a sharp rise in property prices.
As Hong Kong's Financial Secretary, Mr Chan Mao-po, summed up, as an open economy, Hong Kong's economy is easily affected by changes in the external environment in the short to medium term. The “Policy Address” injects greater momentum into Hong Kong's short, medium and long-term development, while the economic environment will affect Hong Kong's financial situation. While carefully balancing fiscal soundness, it will definitely be provided with resources and appropriate financing to fully implement the measures proposed in the Policy Address.
Editor/jayden