The “big killer” stamp duty fiasco is back, Hong Kong stocks are down and A shares are down hard! Stockholders in both places are completely confused.
The 24th Hong Kong Economic Times obtained the news of “Hong Kong will raise stamp duty” in advance, and released the news before the official announcement.
Hong Kong stocks then exploded, the Hang Seng Index plunged 3%, the Hang Seng Technology Index fell more than 5%. Southbound funds rushed to escape, with a net outflow of 20 billion yuan.
The HKEx shares, which bore the brunt of the fall, plunged 12% intraday, the biggest drop in 2015.
HSI plunges, A-shares fall hard!
In the past 2020, HKEx was one of the most bullish performers among the constituents of the Hong Kong Hang Seng Index, with its share price rising about 70% that year.
Affected by the stamp duty news, it plunged 12% during the day and still closed down nearly 9%. The Hang Seng Index also fell more than 3% during the day, and the Hang Seng Technology Index fell more than 6% at one point.
Panic fermented and A-shares also followed the dive. By the close of trading, the Shanghai Stock Exchange Index fell 1.99%, the Shenzhen Stock Exchange Index fell 2.44% and the Growth Enterprise Market Index fell 3.37%. Northbound funds also turned from net buying to net outflow.
Liquor and other hold stocks plunged again, including Luzhou Laojiao down, Guizhou Maotai fell more than 5%, falling below 2,200 yuan, evaporating 500 billion after the holiday! Liquor, Wuliangye, Shanxi Fenjiu, Shuijingfang and other collective heavy losses.
In addition, the GEM index again returned to the edge of 3000 points, the lowest since January 19, the cumulative decline of more than 12% in the last 5 days.
Stamp duty on stock transactions increased by 30%
No surprise, stamp duty was the direct trigger for the plunge.
At lunchtime, the Financial Secretary of the HKSAR government, Mr. Paul Chan, made a confirmation, reading out the new budget, deciding to introduce a bill in which Hong Kong plans to raise the stamp duty on stock transactions from 0.1% to 0.13%.
According to Mr. Chan, after fully considering the impact on the securities market and international competitiveness, the HKSAR government decided to submit a bill to adjust the stamp duty rate on stock transactions from the current 0.1 percent paid by each buyer and seller on the amount of the transaction to 0.13 percent.
This means a one-off increase of 30% in the stamp duty levy rate on Hong Kong stocks.
According to calculations by the Hong Kong Economic Times, both buyers and sellers are currently required to pay 0.1% of the stamp duty on each transaction amount (less than $1 is also counted as $1), so if you buy a lot of Tencent (00700), for example, assuming that Tencent’s share price is $700 and the value of a lot of 100 shares is $70,000, that is, buyers and sellers need to pay $70 each for stamp duty, and after the tax increase, buyers and sellers need to pay $91 each, which means an increase of $21.
HKEx said in a media briefing on the 2020 annual results that the stamp duty increase will not be implemented in a few months and still requires a legislative process.
The issue of whether Hong Kong’s stamp duty should be raised was discussed in the Hong Kong Legislative Council on Feb. 3 this year.
At that Time, the Hong Kong Financial Services and the Treasury Bureau did not have a clear statement on this, but said that it would continue to review the stamp duty rate on stock transactions under the factors of balancing the revenue of the Hong Kong government, promoting market development and maintaining the competitiveness of the Hong Kong stock market.
According to the information of the Hong Kong Inland Revenue Department, since 1993, the stamp duty rate on Hong Kong stocks has shown a continuous decline.
From April 1, 1993 to March 31, 1998, the tax rate was 0.15%.
From 1 April 1998 to 6 April 2000, the tax rate was reduced to 0.125%.
April 7, 2000 to August 31, 2001, when the tax rate was reduced to 0.1125%.
From September 1, 2001 to the present, the tax rate was reduced again to 0.1% and has been used since then.
It can be said that the stamp duty rate of Hong Kong stocks has never been increased. So why the sudden upward adjustment this time? It may be related to the economic depression in Hong Kong in the past two years.
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