Response to the Chief Executive's Announcement on Adjusting Stock Stamp Duty and Other Measures to Enhance Market Liquidity
Release Date: 2023-10-25
October 25, 2023
On October 25, during the Legislative Council Policy Address, Chief Executive John Lee unveiled a suite of initiatives aimed at bolstering liquidity in the stock market, which includes a reduction in the stock stamp duty rate from 0.13% to 0.1%, reverting to levels prior to the stamp duty increase in August 2021. Our association has consistently advocated for a reduction in stock stamp duty and has previously called for its complete abolition. However, we believe that the current reduction is inadequate to tackle the significant challenges confronting the market, and it fails to substantially improve the attractiveness and liquidity of the Hong Kong stock market.
Hong Kong has long been recognized as a leading international financial center, with its stock market serving as a vital element of the financial ecosystem. Nonetheless, the persistently high stamp duty remains a considerable impediment for investors. Even after this adjustment, the rate continues to exceed those in other major financial hubs (as outlined in our publication "Please Restore a Future for the Securities Industry"), hindering the ability to draw international capital into the Hong Kong stock market.
While the Hong Kong government is actively encouraging citizens to engage in nightlife to stimulate the local economy, the stock market's overall performance remains lackluster, characterized by declining trading volumes. Investors witnessing continuous depreciation of their securities, alongside citizens not involved in the stock market observing declines in their Mandatory Provident Fund balances due to market conditions, may find it challenging to muster the enthusiasm and financial resources needed to respond to governmental calls for increased nighttime consumption.
The local securities industry has already faced a significant setback due to the government's decision to raise the stock stamp duty in August 2021. Over the past two years, elevated transaction costs have dampened investor sentiment, resulting in a drastic decline in trading volumes and negatively impacting brokerage revenues. This challenging business environment has compelled many professionals to exit the market, jeopardizing not only their livelihoods but also threatening the government's salary tax revenue. Concurrently, rising unemployment places immense strain on the social welfare system.
Ensuring Personal Safety in Market Operations During Adverse Weather
We have clearly articulated our concerns in a public letter to the Chief Executive and Financial Secretary in mid-October regarding the continuation of market operations during adverse weather conditions. Implementing such measures raises issues pertaining to the rights and safety of frontline financial industry employees. These initiatives introduce various risks for local investors and brokers, including credit, market, liquidity, and operational risks, while also heightening operational costs and labor burdens for brokers. Additionally, they present complex challenges for the banking sector, particularly concerning technical issues in fund allocation and settlement that require resolution.
We urge the government to conduct a comprehensive risk assessment before enacting these measures to safeguard the well-being of frontline employees. Our association is open to engaging in further discussions with the government regarding supportive measures, including transportation and technology solutions, to devise practical strategies that do not exacerbate employee costs and risks.
We strongly advocate for the government to take more decisive action by further reducing the stock stamp duty or even considering its complete abolition. Such measures would enhance the competitiveness and allure of the Hong Kong stock market, encouraging greater investor participation, increasing market liquidity, and fostering economic development both during the day and at night. Moreover, this initiative could attract more domestic and international companies to list in Hong Kong, further solidifying its position as a premier international financial center.
Sincerely,
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association
"Please Restore a Future for the Securities Industry"
https://www.hksfpa.org/en/detail-page/id/112
"Open Letter to the Chief Executive and Financial Secretary on Concerns about Market Operations During Adverse Weather Conditions."
https://www.hksfpa.org/en/detail-page/id/109
On October 25, during the Legislative Council Policy Address, Chief Executive John Lee unveiled a suite of initiatives aimed at bolstering liquidity in the stock market, which includes a reduction in the stock stamp duty rate from 0.13% to 0.1%, reverting to levels prior to the stamp duty increase in August 2021. Our association has consistently advocated for a reduction in stock stamp duty and has previously called for its complete abolition. However, we believe that the current reduction is inadequate to tackle the significant challenges confronting the market, and it fails to substantially improve the attractiveness and liquidity of the Hong Kong stock market.
Hong Kong has long been recognized as a leading international financial center, with its stock market serving as a vital element of the financial ecosystem. Nonetheless, the persistently high stamp duty remains a considerable impediment for investors. Even after this adjustment, the rate continues to exceed those in other major financial hubs (as outlined in our publication "Please Restore a Future for the Securities Industry"), hindering the ability to draw international capital into the Hong Kong stock market.
While the Hong Kong government is actively encouraging citizens to engage in nightlife to stimulate the local economy, the stock market's overall performance remains lackluster, characterized by declining trading volumes. Investors witnessing continuous depreciation of their securities, alongside citizens not involved in the stock market observing declines in their Mandatory Provident Fund balances due to market conditions, may find it challenging to muster the enthusiasm and financial resources needed to respond to governmental calls for increased nighttime consumption.
The local securities industry has already faced a significant setback due to the government's decision to raise the stock stamp duty in August 2021. Over the past two years, elevated transaction costs have dampened investor sentiment, resulting in a drastic decline in trading volumes and negatively impacting brokerage revenues. This challenging business environment has compelled many professionals to exit the market, jeopardizing not only their livelihoods but also threatening the government's salary tax revenue. Concurrently, rising unemployment places immense strain on the social welfare system.
Ensuring Personal Safety in Market Operations During Adverse Weather
We have clearly articulated our concerns in a public letter to the Chief Executive and Financial Secretary in mid-October regarding the continuation of market operations during adverse weather conditions. Implementing such measures raises issues pertaining to the rights and safety of frontline financial industry employees. These initiatives introduce various risks for local investors and brokers, including credit, market, liquidity, and operational risks, while also heightening operational costs and labor burdens for brokers. Additionally, they present complex challenges for the banking sector, particularly concerning technical issues in fund allocation and settlement that require resolution.
We urge the government to conduct a comprehensive risk assessment before enacting these measures to safeguard the well-being of frontline employees. Our association is open to engaging in further discussions with the government regarding supportive measures, including transportation and technology solutions, to devise practical strategies that do not exacerbate employee costs and risks.
We strongly advocate for the government to take more decisive action by further reducing the stock stamp duty or even considering its complete abolition. Such measures would enhance the competitiveness and allure of the Hong Kong stock market, encouraging greater investor participation, increasing market liquidity, and fostering economic development both during the day and at night. Moreover, this initiative could attract more domestic and international companies to list in Hong Kong, further solidifying its position as a premier international financial center.
Sincerely,
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association
"Please Restore a Future for the Securities Industry"
https://www.hksfpa.org/en/detail-page/id/112
"Open Letter to the Chief Executive and Financial Secretary on Concerns about Market Operations During Adverse Weather Conditions."
https://www.hksfpa.org/en/detail-page/id/109