The Zhitong Finance App learned that Tianfeng International released a research report saying that recently, news about “reducing dividend tax on mainland individual investors investing in Hong Kong listed companies in Hong Kong, China through Hong Kong Stock Connect” has received widespread attention. Industry insiders said that this news stimulated the rise of Hong Kong stocks to a certain extent. What is the Hong Kong Stock Connect dividend tax? What is the impact of the Hong Kong Stock Connect dividend tax reduction? Currently, when mainland investors receive dividends by investing in Hong Kong stocks through the Hong Kong Stock Connect, they are required to pay dividend dividend tax. Under current standards, mainland investors receive higher dividend taxes through Hong Kong Stock Connect investments than investors directly opening accounts in Hong Kong, China. Therefore, the current potential adjustment of the Hong Kong Stock Connect dividend tax may be more aimed at mainland individual investors.

Although potential direct tax relief may be limited, the impact may be greater if public funds that essentially represent individual investors are also included in the scope of potential adjustments. Implementing adjustments is expected to boost market sentiment in the short term and increase the attractiveness of high-dividend investment and the liquidity of Hong Kong stocks in the medium to long term.

According to CICC's estimates, the total dividend tax collected by the Hong Kong Stock Connect mechanism is about HK$45 billion each year. Assuming that individual mainland investors account for about 1/4 of the Hong Kong Stock Connect investment, it is estimated that the direct tax relief brought about by this potential adjustment is about HK$10 billion per year. If public funds are included, the resulting tax relief could be extended to around HK$20 billion. Considering that the average daily turnover of the main board of the Hong Kong stock market since this year is about HK$100 billion, the short-term direct relief brought about by this potential adjustment may be limited in scale, but it can boost investor sentiment.

So, within just two weeks, Hong Kong stocks recovered all of their decline since September last year. The Hang Seng Index surpassed 18,000 points, leading the global market, and the market rose again because of tax exemptions, so will Hong Kong stocks continue to rise? How much room and persistence is left?

The core impetus for this round of growth in Hong Kong, China, is mainly due to financial improvements. Last year, the systematic outflow of foreign capital put pressure on the Hong Kong stock market, but recently the focus of foreign investment in the Asia-Pacific region has shifted from Japan to Hong Kong stocks, which has significantly increased the liquidity of Hong Kong stocks. At the same time, under the dual incentives of favorable policies and high dividend returns, the inflow of capital to the south has increased dramatically, further consolidating the upward trend in Hong Kong stocks.

Meanwhile, Hong Kong, China is currently at a historically low level of valuation. Listed companies are increasing their repurchase dividends to further increase the allocation value of domestic investors to Hong Kong stocks. At the same time, the China Securities Regulatory Commission announced five capital market cooperation measures with Hong Kong, which sent a strong “pro-Hong Kong” signal, provided incremental capital for Hong Kong stocks, and helped improve medium- to long-term liquidity. The 20-day average short selling ratio of Hong Kong stocks remained at a high level of around 19%, compounding that some foreign investors raised the investment rating of Hong Kong stocks, or prompted some shorts, hedge funds and foreign investors to make up positions.

As a market closely linked to foreign currencies, Hong Kong, China, looks at the US dollar in terms of capital and China on the fundamentals. From a fundamental perspective, the implementation of more symptomatic policies and measures, as well as support from improved economic data, are the main factors affecting the trend of Hong Kong stocks; from a foreign perspective, when the Federal Reserve will cut interest rates and fluctuations in market expectations about the pace of interest rate cuts still affect the sentiment and liquidity of the Hong Kong stock market. However, no actual reversal data has been released for either of these data items, so the current Hong Kong stock market, after experiencing a certain increase, will increase subsequent fluctuations.