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The hike in taxes on Hong Kong equity trading has been a “practical catalyst” that has helped spur a healthy correction for the city’s markets, says Tim Moe of Goldman Sachs.
The government announced in its budget on Wednesday that the stamp duty on share transfers would be increased to 0.13% from 0.1%.
The move sparked a sell off in wider markets on Wednesday, but stock prices partially rebounded on Thursday.
The Hang Seng Index rose about 1.5% in Thursday afternoon trading, after falling about 3% the day before.
Meanwhile, the Hong Kong stock exchanges and clearing saw more losses as they slipped about 1.4%, falling further after the more than 8% drop the day before. The HKEX operates the city’s stock exchange and on Wednesday announced a more than 20% year-over-year increase in its 2020 profit attributable to shareholders.
“I think it’s important to note that the overall increase, I mean, yeah, it seems like a high 30% figure, but it’s really 3 cents for every hundred dollars you trade – it won’t be much. the only or sufficient fundamental reason for people to make an investment decision, ”said Moe, co-director of Asia macro-research and chief Asia-Pacific equities strategist at the US investment bank.
In our opinion, the increase in the stamp duty was somewhat of a practical catalyst for a market that had worked very, very well.
Timothy moe
Chief Asia-Pacific Equities Strategist, Goldman Sachs
“We think the stamp duty increase was sort of a practical catalyst for a market that had been doing very, very well. It’s probably a little above its skis in terms of positioning, valuation and we had what you might call a good fix, ”he told CNBC’s“ Squawk Box Asia ”Thursday.
Despite Wednesday’s big losses, the Hang Seng Index is still over 9% higher for the year, at Wednesday’s close.
In January, Moe told CNBC that mainland Chinese investors were a big contributor to Hong Kong stocks’ “really good start” in 2021.
Looking ahead, the Goldman Sachs strategist said Hong Kong markets are likely to continue their ascent once this selling period subsides.
“What we would consider to be a sort of healthy cleanup of over-stretched positioning, some of the preferred, heavily owned stocks have sold,” Moe said. “We believe that once we break through that kind of clear positioning, that the market … can continue to make further upward gains later this year.”
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