Chinese School - Finance: Stamp duty rise considered good news to HK

BIZCHINA / Biz Media Digest

Finance: Stamp duty rise considered good news to HK

(Xinhua)
Updated: 2007-06-01 15:00

China's decision to raise stock trading tax, which caused a big fall of A
share market on the Chinese mainland Wednesday may be a good news to most
Hong Kong investors as they are expecting more mainland capitals to flow
in through Qualified Domestic Institutional Investors (QDII) scheme to
boost the sluggish Hong Kong market.

Related readings:
Hang Seng falls 175 points after stamp duty hike
HK upbeat over QDII quota widening Opinions mixed on measures to cool
down share market

Hong Kong stocks suffered a consecutive three-day loss until Thursday,
when the benchmark of Hang Seng Index closed 340.71 points higher to
20634.47. However, most investors thought the three-day's fall just as a
short term reflection dragged by the fall of A-share market due to the
series of controlling policy, including the stamp duty rise from 0.1
percent to 0.3 percent Wednesday.

Analysts believe the stamp duty rise may promote more mainland investors
to Hong Kong through QDII or through other investing channels.

Some brokers even predicted that China Banking Regulatory Commission may
further ease the investment volume of QDII by allowing Chinese banks to
invest more than 50 percent of its overseas investment in stocks, which
may attract more investors to put more money to overseas market instead
of A-shares and thus reduce the A-share bubbles.

Hong Kong stock market, which is an international investment platform yet
getting more and more sensitive to the movement of A- shares, used to
follow the up and down of A-shares. However, the pattern has changed this
year into only following A-share's down trend but remaining sluggish even
if its A-share counterparts going sky high, which leads to further price
gap between H-shares and A-shares.

Investors believe the money flow in through QDII may focus on companies
with both A-shares and H-shares because the price gap between the two
parts will attract investors to buy the relatively cheaper H-shares
hoping the latter's catching-up may bring them big rewards.

If that is the direction of Hong Kong stock market, analysts believe a
balance will be achieved between A-share and H-share and therefore
investors in Hong Kong market may not need to worry about further going
down. Instead, they need to buy and wait for QDII to bring money in.

(For more biz stories, please visit Industry Updates)

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