Response to the 2024/25 Budget Announcement
Release Date: 2024-02-28
Following the budget announcement today by Financial Secretary Paul Chan, we present our views on the key highlights:
1. Swift Implementation of Task Force Recommendations to Boost Stock Market Liquidity
We urge the government to release the task force's report promptly. It's concerning that the task force overlooked consultation with major securities industry stakeholders and appears biased towards the fund industry.
2. Development of a Stock Buyback Mechanism and Market Operations During Severe Weather: Target Implementation by Mid-Year
(i) We have reservations about the stock buyback mechanism, particularly regarding the suspension period. Companies focused on long-term growth should not be diverted by frequent buybacks, and a suspension period of 30 days or less may encourage trading beyond regular business practices. Excessive buybacks could heighten operational risks, especially when funds might be better allocated elsewhere.
Concerning new listing applicants, we are skeptical about the sufficiency of a six-month period before they can issue new shares, as this may not adequately protect public investors from dilution or ensure controlling shareholders' commitment. This policy might lead to companies hoarding treasury shares for acquisitions or other strategic purposes, potentially giving the impression of speculation.
(ii) On the matter of maintaining market operations during severe weather, while we support initiatives beneficial to Hong Kong and the industry, the consultation document lacks practical details. Though implementation is targeted for mid-year, these details require thorough discussion. We have communicated to the government and HKEx the challenges faced by numerous brokerages in system upgrades, stressing the need for the authorities' understanding.
Should the government mandate market operations during severe weather without sufficient safety measures, we will firmly oppose.
3. Measures to Enhance Listing Mechanisms, Optimize Trading, Improve Investor Services, and Strengthen Market Promotion
We have consistently advocated for comprehensive listing reforms, including fair treatment of SMEs, acknowledgment of local competition, and the removal of biased guidelines. The pace of trading mechanism optimization is slow and needs acceleration. Market promotion is inadequate, overshadowed by regulatory focus, as highlighted in our public letter to the government last August.
4. Exemption of Stamp Duty for REIT Unit Transfers and Option Market Makers
We support these measures and believe they will enhance market liquidity.
5. Issuance of HKD 50 Billion in Silver Bonds and HKD 20 Billion in Green and Infrastructure Bonds
We welcome these issuances and recommend monitoring bond yields to ensure their appeal, advocating for continued retail access.
6. Promotion of Block Trading, Inclusion of RMB Counters in Stock Connect, and REITs in Connectivity Programs
No comments.
7. Extension of the "Open-ended Fund Company and REIT Support Scheme" for Three Years
We support this extension and advocate for its long-term development.
8. Optimization of Tax Incentives for Family Office Funds
We welcome this initiative.
9. Continuation of the Cross-border Credit Data Connectivity Framework
While we lack specific details, we view this as a positive collaboration, emphasizing the need for careful data management.
10. Additional HKD 100 Million Allocation to Promote and Facilitate Financial Services Development
We welcome this allocation.
11. Establishment of Green Finance Sustainable Disclosure Standards
We welcome this development.
Hong Kong Securities and Futures Professionals Association
1. Swift Implementation of Task Force Recommendations to Boost Stock Market Liquidity
We urge the government to release the task force's report promptly. It's concerning that the task force overlooked consultation with major securities industry stakeholders and appears biased towards the fund industry.
2. Development of a Stock Buyback Mechanism and Market Operations During Severe Weather: Target Implementation by Mid-Year
(i) We have reservations about the stock buyback mechanism, particularly regarding the suspension period. Companies focused on long-term growth should not be diverted by frequent buybacks, and a suspension period of 30 days or less may encourage trading beyond regular business practices. Excessive buybacks could heighten operational risks, especially when funds might be better allocated elsewhere.
Concerning new listing applicants, we are skeptical about the sufficiency of a six-month period before they can issue new shares, as this may not adequately protect public investors from dilution or ensure controlling shareholders' commitment. This policy might lead to companies hoarding treasury shares for acquisitions or other strategic purposes, potentially giving the impression of speculation.
(ii) On the matter of maintaining market operations during severe weather, while we support initiatives beneficial to Hong Kong and the industry, the consultation document lacks practical details. Though implementation is targeted for mid-year, these details require thorough discussion. We have communicated to the government and HKEx the challenges faced by numerous brokerages in system upgrades, stressing the need for the authorities' understanding.
Should the government mandate market operations during severe weather without sufficient safety measures, we will firmly oppose.
3. Measures to Enhance Listing Mechanisms, Optimize Trading, Improve Investor Services, and Strengthen Market Promotion
We have consistently advocated for comprehensive listing reforms, including fair treatment of SMEs, acknowledgment of local competition, and the removal of biased guidelines. The pace of trading mechanism optimization is slow and needs acceleration. Market promotion is inadequate, overshadowed by regulatory focus, as highlighted in our public letter to the government last August.
4. Exemption of Stamp Duty for REIT Unit Transfers and Option Market Makers
We support these measures and believe they will enhance market liquidity.
5. Issuance of HKD 50 Billion in Silver Bonds and HKD 20 Billion in Green and Infrastructure Bonds
We welcome these issuances and recommend monitoring bond yields to ensure their appeal, advocating for continued retail access.
6. Promotion of Block Trading, Inclusion of RMB Counters in Stock Connect, and REITs in Connectivity Programs
No comments.
7. Extension of the "Open-ended Fund Company and REIT Support Scheme" for Three Years
We support this extension and advocate for its long-term development.
8. Optimization of Tax Incentives for Family Office Funds
We welcome this initiative.
9. Continuation of the Cross-border Credit Data Connectivity Framework
While we lack specific details, we view this as a positive collaboration, emphasizing the need for careful data management.
10. Additional HKD 100 Million Allocation to Promote and Facilitate Financial Services Development
We welcome this allocation.
11. Establishment of Green Finance Sustainable Disclosure Standards
We welcome this development.
Hong Kong Securities and Futures Professionals Association