Stockbrokers to lobby for lower stamp duties

Industry body says cut in transaction fee will benefit market players and boost turnover

PUBLISHED : Monday, 13 January, 2014, 1:02am
UPDATED : Monday, 13 January, 2014, 1:02am

Stockbrokers plan to lobby the government to reduce the stamp duty on stock transactions to help boost market turnover.

"Cutting stamp duty would benefit investors and stockbrokers," said Jeffery Chan Lap-tak, the chairman of the Hong Kong Securities Association. "The minimum brokerage commission was abolished in 2003 to reduce transaction costs. Why doesn't the government slash the stamp duty as well?"

About 41 per cent of 275 stockbrokers surveyed by the HKSA last month said they believed cutting stamp duty would help improve market turnover and their business.

Chan said stamp duties - buyers and sellers both pay 0.1 per cent of the value of each stock transaction - constituted the biggest portion of transaction cost at 63 per cent.

In contrast, brokerage commissions, which once used to be the largest component of the transaction cost, have dropped substantially. Before April 2003, when the minimum commission was 0.25 per cent, it constituted more than 70 per cent of the transaction cost. Now, with the average fee at 0.05 per cent, it represents 32 per cent of the cost.

"The government will continue to consider different measures to improve the quality and competitiveness of our market," said a spokesman of the Financial Services and the Treasury Bureau in response to the brokers' lobby.

Cutting stamp duty would benefit investors and stockbrokers

The spokesman said stamp duty was cut to 0.1 per cent from 0.125 per cent in 2001.

In the survey, about 33 per cent of brokers believed reintroducing the minimum brokerage commission would help their business, while 15 per cent wanted Beijing to expand the qualified domestic institutional investor scheme to allow more mainlanders to invest in Hong Kong, and 8 per cent called for more new products to be launched.

Ben Kwong Man-bun, a director of HKSA and the chief operating officer of KGI Asia, said price war and keen competition had made it difficult for brokers to survive. "We need a higher market turnover and more new products to help brokers," he said. "As the business pie gets bigger, all brokers would benefit and it is also good for Hong Kong as an international market."

Chan said that if the stock exchange listed more debt and commodity products as well as futures and options, it would help brokers to expand their business. "Investors do not only want to trade stocks, they want to trade all sorts of products," he said.

The survey showed half the brokers believed the Hang Seng Index would rise between 5 and 20 per cent this year, while 66 per cent said average daily market turnover would reach HK$60 billion to HK$80 billion, compared with last year's HK$62.6 billion.

Hong Kong Exchanges and Clearing will this year waive some terminal fees for the about 500 brokers, enabling them to save HK$10 million a year. The waiver follows the fierce competition that led to the closure of 14 brokerage houses last year.

Legislator Christopher Cheung Wah-fung said the exchange and the government needed to do more to help brokers. He said the Financial Services Development Council, a government advisory body, had not come up with any proposal to help the industry.

"It is disappointing that the council only agreed to provide assistance to brokers to shift to other industries or in mergers. That doesn't help. The council should propose more concrete measures to boost the broking community," Cheung said.

Chan said the HKSA was also opposed to extending trading hours. "Ever since the hours were extended, everybody has been working longer, without any real increase in market turnover. There is no point changing the trading time again as it would only add costs and not boost turnover," he said.

In the past two years, the exchange extended trading hours for stocks to 51/2 from four while those for futures were doubled to 12. It is considering extending futures trading hours by 45 minutes to match overseas markets, some of which trade for 23 hours a day.