THE cut in stamp duty on share transactions should help stem the flow of Hongkong shares moving on to overseas markets, but Hongkong remains an expensive place to trade, stock market figures said last night. Mr Paul Chow, chief executive of the Hongkong exchange, said this was the third year in a row that stamp duty had been cut. ''Elimination of stamp duty on stock market transactions is a worldwide trend and I hope it will not be too long until it is abolished in Hongkong,'' he said. Mr Macleod announced that the stamp duty on share transactions would be cut from 0.4 per cent to 0.3 per cent. Each party will now pay 0.15 per cent instead of 0.2 per cent of the price of the shares. Stamp duty is one of the few taxes in Hongkong that is high by world standards. According to the Hongkong Stockbrokers Association, more than half the markets worldwide have no stamp duty. The cut will be on top of the ending of the special ''lifeboat'' levy being used to undo the financial damage of the crash of 1987, which is expected to have served its purpose by early next year. It is understood that proposals for reducing the transaction levy, yet another tax on share trading, will soon be put to the Executive Council. Brokers say it may slightly increase the pace of trade on the market, but should not have a dramatic effect. Any effect could be swamped if a campaign to increase brokers' commission rates succeeds. However, the changes help Hongkong's campaign to compete for the favours of pension funds and other very large investors who have increasingly been trading the shares of Hongkong companies on the exchanges in London and New York, where dealing costs are lower. About half of the trade in Hongkong Telecom now takes place in New York, the company said yesterday. A spokesman for the Securities and Futures Commission said last night: ''We welcome the reduction. Our concern is that if you are a big institutional investor, there are competing markets in Hongkong stock. Dealing costs are a primary consideration.'' About 750 million Hongkong Telecom shares are now stored in bank vaults in the US and investors effectively trade IOUs that entitle them to the dividends on those shares. Mr Henry Wu, chairman of the Hongkong Stockbrokers Association, asked for the stamp duty to be abolished as soon as possible. Hongkong authorities are working hard on other ways to please international investors. On Friday the Hongkong Futures Exchange is starting trade in options, already common in the US and Europe, which allow many new investment strategies and help investors reduce their risks.