Equities
China considers waiving 20% dividend tax for Stock Connect investors to boost Hong Kong market and address double taxation.
By Max Weldon
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China is reviewing a significant proposal that could exempt individual investors from the 20% dividend tax on Hong Kong stocks purchased through the Stock Connect program. This initiative, aimed at preventing double taxation and ensuring fairer conditions for investors in both Hong Kong and mainland China, is under consideration by the China Securities Regulatory Commission (CSRC) and the State Taxation Administration. The proposal, submitted by Hong Kong, seeks to address the current disparity, as Hong Kong itself does not impose a dividend tax. While the potential for this exemption has sparked interest, a final decision has yet to be made, and the timeline for its implementation remains uncertain.
Hong Kong's financial market has faced challenges, including a downturn in initial public offerings (IPOs) and trading volumes. In response, the CSRC has introduced measures to expand the scope of the Stock Connect, part of broader efforts to rejuvenate the market. Julia Leung, Chief Executive of Hong Kong's Securities and Futures Commission (SFC), has indicated that these changes are planned to be implemented within the year. This proactive stance is aimed at enhancing the market's attractiveness and liquidity, signaling a commitment to revitalizing Hong Kong's financial landscape.
Recent data highlights a decline in trading activity through the southbound link of the Stock Connect, with an average daily trading volume of HK$31 billion in the first quarter, representing a 17% decrease from the previous year. This downturn has also impacted the financial performance of the Hong Kong Exchanges and Clearing Limited (HKEX), which reported a 13% year-on-year drop in first-quarter profit. Additionally, HKEX's share price has significantly declined, currently standing 53% lower than its early 2021 levels. These figures underscore the challenges facing Hong Kong's financial market and the urgency of implementing measures to stimulate recovery and growth.
"We believe it is fair to assume a degree of spike in south-bound turnover on expectations of approval and further, if approval comes."
Finance GPT
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