End to lifeboat levy aids rescue of market
SO we finally say farewell to the lifeboat levy, launched in 1987 following one of the darkest storms ever to rock the Hong Kong stock market.
Its dissolution on Monday will mark the end of a chapter, just as its establishment marked the beginning of one.
When the stock market opened on October 26, after four days of eloquent silence, the need for a major overhaul of systems was all too apparent.
The report produced by Ian Hay Davison was the start of reforms which are still in progress, and which will be a permanent feature as the capital markets develop further.
An important part of that process will be to make Hong Kong competitive with other developing regional markets, as well as the major exchanges of the world, which are hunting for more listings to boost their business.
The lifting of the levy will go some small way to achieving that necessary edge by reducing dealing costs in the territory.
All transactions since 1987 have carried a 0.03 per cent fee to cover the levy, while transactions on the Hang Seng Index futures have incurred a $5 cost on both sides.
Now it is time to go further, for Hong Kong is going to need all the help it can get.
The efforts of the Securities and Futures Commission (SFC) and the Stock Exchange of Hong Kong to provide the best environment, in which all types of investors can feel comfortable, must go on.
Regulation is a crucial part of that process, but at the end of the day, the international fund managers look at the bottom line.
Costs count above all else - they can look after themselves when it comes to execution and picking stocks.
So it is time to examine the need for stamp duty. It was reduced from 0.2 per cent to 0.15 per cent in the Budget, but why not just eliminate it altogether? The speed at which Hong Kong stock trading is draining away to SEAQ International in London, and to New York should convince the authorities that Hong Kong can afford to do without it.
The SFC supports the removal of the stamp duty; can it argue, then, with the removal of the 0.02 per cent levy charged on trades which goes to finance its own activities?
