The record year of the Hong Kong stock market leads to a large tax hike


Hong Kong unexpectedly moved to raise taxes on stock trading by 30%, which put a damper on the city’s stock exchange operator as it revealed record annual sales and earnings.

An increase in trading and new listings has spurred Hong Kong’s exchanges and clearing GmbH.

388 -8.78%

which, due to its own market valuation, has become the world’s largest stock exchange operator and the fourth-largest company listed on its stock exchange.

The rise of the group also reflects the rise of Chinese financial markets, which are among the largest and most important in the world after those in New York.

On Wednesday, however, the Hong Kong government spoiled what was actually a victorious round for the Hong Kong stock exchanges. The government appoints half of the company’s board of directors, including its chairman, and has an interest in the company.

Paul Chan, the city’s financial secretary, suggested raising the so-called stamp duty on stocks from 0.1% to 0.13% as part of Hong Kong’s annual budget. Hong Kong has been hit by the effects of the pandemic and past social unrest. The economy shrank by a record 6.1% last year.

The looming tax hike has hurt stocks in the Hong Kong Exchanges, even though 2020 net income was reported at $ 1.48 billion, a 23% increase and the largest increase yet.

The company’s stock, which recently hit record highs, fell as much as 12% before reducing some losses to 10.4% in afternoon trading. The city’s benchmark Hang Seng index, which recently hit its highest level since June 2018, fell 3.6%.

The tax hike is likely to hurt smaller brokers and individual investors who bet on stocks on a daily basis, said Christopher Cheung Wah-fung, Christfund Securities chairman and lawmaker who represents brokers in Hong Kong.

However, it is unlikely that Hong Kong’s overall competitiveness will be affected as the city does not levy capital gains taxes. “It’s a way for the government to generate more immediate revenue as trade increases, as it has to offer more flyers in the face of the economic downturn,” Cheung said.

The Hong Kong Exchanges said they were disappointed with the decision, but recognized that the levy would be a major source of income for the state. “HKEX looks forward to continuing to work closely with all of its stakeholders to drive the continued success, resilience, vibrancy and attractiveness of Hong Kong’s capital markets,” said a spokesman.

Finance Secretary Chan said in his budget speech that the government had considered the market impact and international competitiveness of the city and would develop the securities market.

Hong Kong stock trading has been booming lately, hitting a new record on Monday. The equivalent of 39 billion US dollars in motherboard shares changed hands.

Mainland investors have helped boost activity by pouring money into Chinese stocks that are cheaper or only available in the offshore market. According to data provider Wind, the purchase through a trading line called Stock Connect was $ 40.1 billion in January. This is the highest monthly total since the program started in 2014.

Write to Joanne Chiu at

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