Hong Kong eyeing task force to improve stock market liquidity: John Lee

Lee said the move would help Hong Kong as a whole by strengthening the economy, adding he hoped the task force would help inform his policy address in October.

Asked whether authorities would reduce stamp duty on stocks, Lee noted the task force would explore different possibilities and consider various opinions in its research.

The group was expected to propose a raft of short- and long-term measures, he said.

Securities listed on the Hong Kong stock exchange are subject to stamp duty for all share transactions at a rate of 0.13 per cent of the value of the trade for both the buyer and the seller. Authorities last increased stamp duty for all share transactions by 30 per cent in August 2021.

The rate is higher than the mainland’s 0.1 per cent, which will be halved from Monday according to a statement by the Chinese finance ministry on Sunday, in the latest attempt to invigorate the capital market and boost investor confidence.

The mainland at present only imposes stamp duty on stock sales, and the last cut to the levy was made during the 2008 global financial crisis.

A spokesman from the office of Hong Kong’s financial secretary told the Post the task force would thoroughly examine the factors influencing market liquidity and provide recommendations to the chief executive, but stopped short of revealing whether the city would follow the mainland’s lead on stamp duty.

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“A quick way to boost stock market liquidity is to implement recommendations already put up to the government for a while, such as reducing stock market transaction costs by cutting stock transaction stamp duties,” Ip said.

“The government has agreed to review the moribund Growth Enterprise Market Board for a while without producing any results,” she said, referring to the second board of the Hong Kong stock exchange, which aims to allow fundraising for companies that fail to meet the profit requirement for a main listing.

“[The government] has been looking to the Middle East and Asean countries as new sources of capital. Quite rightly so, but interest in IPOs [initial public offerings] in Hong Kong is low if stock valuations are low.

“Ultimately, capital inflow depends on economic fundamentals. The government has to show it has the ability to respond swiftly to the changing economic environment and has the right prescription to boost our competitiveness,” she said.

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Louis Tse Ming-kwong, managing director of Wealthy Securities, said the city’s financial markets were not only facing competition from overseas exchanges, but were also hampered by local problems.

“The property market is not doing well, and the local economy has been heavily affected by [mainland] China’s economy as well, which has slowed down a bit but has yet to recover to pre-pandemic levels. It takes time,” Tse said.

“It’s also a matter of confidence in the local market. [Mainland] China is willing to cut expenses like stamp duty. I think Hong Kong can also follow suit, if that doesn’t affect the income of the Hong Kong government that much.”

Tse said the city had entered a period of volatility in the markets that had “shattered” investor confidence.

“One day [the market goes] up and the next day [it goes] down in Hong Kong … We don’t have very much confidence at the moment. Things can be changed in the fourth quarter when the US interest [rate] environment gets clearer.”

“A broad description of stock market liquidity is in its turnover. Investors generally have a liquidity premium on owning assets that are easy to buy and sell,” Ng said. “A highly liquid market will appeal more to investors and help expand the market size and attract capital flows in the long run.”

Much attention had been placed on lowering stamp duty, but it was not the city’s main issue, he said.

“Hong Kong is a very mainland China-centric market, and the weaker-than-expected growth and regulatory changes have pushed investors to other markets in the short-run.”

Market capitalisation as of July this year had plunged by around HK$22.51 trillion (US$2.87 trillion) from the historic peak recorded on February 17, 2021, according to the latest data from the exchange. The benchmark Hang Seng Index has lost about 9 per cent this year, after three consecutive years of annual losses.

Among the world’s stock exchanges, the New York Stock Exchange has the largest market capitalisation with US$24.84 trillion as of the end of June, with Shanghai in third place at US$6.8 trillion and Hong Kong in seventh at US$4.32 trillion, according to the Securities and Futures Commissions citing data from Bloomberg and the World Federation of Exchanges.

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Meanwhile, flanked by his 21 principal officials at Sunday’s event at Sha Tin Government Secondary School, the city leader told participants that his coming policy blueprint would consider measures for retaining local talent and helping young people plan their careers.

“In the long run, the focus should be on nurturing local talent, providing them with excellent training, offering promising career paths and opportunities and enhancing their technical abilities. This will enable local talent to fulfil their dreams in Hong Kong,” Lee said.

More than 100 people, including representatives from different districts and sectors, attended the two-hour consultation, with some asking for timelines of a government plan to launch night bazaars that were aimed at boosting the economy.

Lee stressed the three conditions for revitalising the evening economy included the need to unite industry forces, inject new elements, and regularly review and bolster enthusiasm for the initiatives.

“We will strive to launch a series of nighttime activities before or after the Mid-Autumn Festival, utilising the National Day holiday effectively and ensuring continuous promotion until the new year.”