Recently, there are more and more unexpected events in the global financial markets. Following the flash crash of the NASDAQ index by 4% in the United States the other day, on February 24, Hong Kong planned to impose stamp duty because of the fiscal deficit, the Hong Kong Hang Seng Index plunged by 3%, which also led to a bloody rain in the Chinese A-share market, with the potential of a stock market crash to come. Today, we will analyze whether the stamp duty increase in Hong Kong is intended to kill the chicken to save the treasury or to give a flood to the stock market at a high level in advance to cope with the financial risks that may come from the periphery. Will the sudden move to increase the stamp duty bring Hong Kong stocks to collapse?
The news of the stamp duty in Hong Kong was not from the official channel at first, so people were not very worried at first. However, it was subsequently officially “certified” and is planning to submit a bill. According to the Hong Kong Economic Times, Hong Kong Financial Secretary Paul Chan announced that Hong Kong plans to raise the stamp duty on stock transactions from 0.1% to 0.13%. According to brokerage calculations, this increase in stamp duty in Hong Kong is about 30%, and the adjustment will raise the total transaction cost to 0.3877%, raising the total cost by about 8%. This will constitute a direct negative impact on the Hong Kong stock market.
Once the news came out, it was a real shock. The Hang Seng Index fell in a straight line that afternoon, down more than 3.5% during the day, for Hong Kong stocks can be considered a plunge. 15 billion funds withdrew from the line of fire, the Hong Kong Stock Exchange stocks once plunged 12%. A shares, the Shanghai Stock Exchange Index was also brought crash, the lowest fell to 3531.59 points, down more than 2.7%. By the end of the day, the Shanghai index closed down 1.99%, the Shenzhen index fell 2.44%, and the GEM fell 3.3%. the headline features of A-shares were already very obvious, and many people questioned whether the bull market had come to an end.
The HKEx has not raised the stamp duty on stock transactions since 1993. in fiscal year 2020, the stamp duty on stock transactions accounted for 25% of the Hong Kong government’s revenue, presumably a move to make up for the increased fiscal spending during the Epidemic to fill the hole in the coffers. If you don’t find new channels to get some money out, then the back of the fiscal is going to be a problem. And it’s hard to find money from salaries and properties, after all, Hong Kong’s unemployment rate is now at a record high because of the anti-sending and the epidemic blockade, Hong Kong’s real estate, tourism, finance, retail and other major pillar industries are very depressed. We all have a hard Time, this time to tax is certainly a fly on the leg to scrape meat, in addition to cause public anger, can not collect any money. So, the hot stock market has become the best place to gather wool, anyway, check down everyone has cash in their pockets, not bad this money.
After accounting, if the stamp duty is really raised, then, can collect an additional 8 billion Hong Kong dollars in property tax. Indeed, we heard correctly, the Hong Kong government is to collect an extra HK$8 billion in tax revenue to increase the stamp duty on Hong Kong’s financial core stock market. Does the Hong Kong government not know that the bull market of China’s A-shares in 2007 was ruined by the stamp duty that brewed the stock market crash?
Is it true that Hong Kong’s finances are so poor that it is short of the 8 billion Hong Kong dollars to live on? If it is true to this extent, it means that Hong Kong’s economic depression has been difficult to an unimaginable extent. If not, why did the Hong Kong government take the same day plunge of Hong Kong stocks and the big A as the price? You know, these can be the policy proposals formulated by the elite at the top of society, it is impossible not to know the impact of the introduction of stamp duty on the market. If there is no more important reason, in Hong Kong’s economy is not good premise, especially the epidemic control degree is far stricter than China’s background, why for this fine silver to make a chicken feather?
As we all know, the U.S. Biden administration is going for another massive economic stimulus. Not only 1.9 trillion dollars, but also toss trillion dollars level of major infrastructure behind. The most critical thing is that Powell also said, ignore Inflation, firm release of water. In such a context, the future of the U.S. stocks to a new high, it is only a matter of time. However, this may not be a good thing for the backward countries and regions. Because, excess dollar liquidity means passive easing elsewhere in the world, which will further stimulate bigger bubbles and cause fragility in local financial markets, which are very vulnerable to the impact of international capital coming in and out. Also for this reason, when Japanese stocks just reached 30,000 points, the Bank of Japan started discussing whether to stop buying stocks behind them.
The stock market is at a high level, are very panic, afraid to make something happen, and then we all eat together. The Chinese financial market is in the process of opening up, and the Hong Kong stock market is a bridgehead between the inside and outside. A lot of international funds through Hong Kong into the Chinese stock market, there are also a lot of funds through Hong Kong into the international market.
Combined with the Southeast Asian crisis, in the premise of the economic fundamentals are not good, a large influx of foreign capital to speculate on assets, if not properly disposed of, is very easy to make a major crisis. Some time ago China here proposed that we may be able to use their annual $50,000 foreign exchange quota to speculate on U.S. stocks in the future, in fact, to strengthen the up and down fluctuations of the RMB exchange rate, to avoid the risk of unilateral appreciation of the RMB. Because once the unilateral appreciation is expected to form, it will push up the RMB exchange rate, whether it is for trade or exchange rate, it will bring risks.
When Thailand was “high exchange rate + asset bubble” to push up the country’s financial vulnerability, and then, once people shorted, directly to the ground. Obviously, the mainland here in the introduction of foreign investment, in fact, also in the layout to release financial risks in advance.
Late January so far, China’s central bank has repeatedly caged market liquidity, is to give a unilateral upward trend of the big A moderate cooling, short-term do not speculate over the head. So, what does this have to do with Hong Kong stocks?
Hong Kong stocks are actually the bridgehead of China’s foreign financial opening, if Hong Kong stocks are wildly shorted by foreign funds, the big A shares are bound to be linked. Especially now a large number of domestic institutions a lot of money into the Hong Kong stock, really some what problem, the domestic institutions lost a lot of money, that is the loss of mainland savings, is a serious blow to the economy, and may even be interpreted into a certain scale of financial crisis. So, now the Chinese government is somewhat contradictory. On the one hand, do not want the Hong Kong stock market fall, after all, because of the national security law, a lot of capital around the world are withdrawing from Hong Kong, if the Hong Kong financial market decline, Hong Kong stocks can not, will hit the confidence of the Hong Kong economy and financial industry, but also will hit the face of the Chinese government. This is also the main reason why the blockade in Hong Kong is so serious, but there are still a lot of funds from the mainland to enter Hong Kong to speculate on Hong Kong stocks. At the same time, the Chinese government does not want Hong Kong stocks to rise, worried about excessive fire market, will give external shorting opportunities in the Hong Kong financial market, but also worried about the future once the Federal Reserve tightened money, foreign capital withdrawal will bring impact on the Hong Kong financial market, and thus also worried about China’s A-share market is implicated.
On the contrary, when the enthusiasm of Hong Kong stocks is just now up, directly pour a scoop of cold water, to combat the excessive enthusiasm of the market speculation. In this way, the enthusiasm of Hong Kong stocks can be significantly reduced, moderate release of some of the market risk, for the negative impact of financial risk spillover from the peripheral markets, advance layout.
Some time ago, China’s central bank has said, to “prevent the impact of risk spillover from the peripheral financial markets on our country”, this tip has been very obvious, but many people forget that the “China” here is certainly including Hong Kong stocks.
Prevent financial risks, both means that the market can not unilaterally pull up too much, but also means that the market can not unilaterally crazy down. This word is suitable for the big A shares, but also suitable for Hong Kong stocks. In fact, this event fully illustrates that Hong Kong stocks have become an important moat for the big A-shares. Just this sudden operation will certainly make many retail investors bleed and become a new round of harvested leeks.
Even if this round of A-share bull market, in fact, many retail investors just earned the index did not make money, but similar to the black swan of the Hong Kong stamp duty increase, but can cut a lot of leeks. Of course, this does not mean that A shares will have the risk of plummeting. After all, the property market is now forcibly suppressed, the export situation is also beginning to look bleak, residents and refuse to spend, the local debt is huge can not support the mega infrastructure, in the demand side of the premise of so difficult, the negative impact of the epidemic is still in, plus there are so many over-issued currency, China’s stock market really want to casually collapse is unlikely. However, this is not in conflict with institutions harvesting leeks. The typical example is that the index is not earning money.
The Chinese government would probably like nothing better than to create a slow bull, or even to squeeze out the bubble before the big U.S. stimulus, instead of going lighter later. If China does not squeeze out the stock market bubble, mainly of Hong Kong stocks, the wave of the United States after the actual landing of the big stimulus, the rise in inflation will drive the United States bond yields soared, the future once the U.S. stock bubble burst, Hong Kong stocks and A shares may be brought into the ditch, then it may be too late to get out.
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