Hong Kong looks for ways to boost local stock market liquidity: HKSAR chief executive
Published: Aug 27, 2023 10:00 PM Updated: Aug 27, 2023 09:55 PM
The Hong Kong Stock Exchange building Photo: VCG

The Hong Kong Stock Exchange building Photo: VCG

Hong Kong will set up a working group to look into ways to boost stock market liquidity, with details to be announced soon, Hong Kong Special Administration Region (HKSAR) Chief Executive John Lee Ka-chiu said on Sunday.

HKSAR Financial Secretary Paul Chan Mo-po will lead the group which is expected to start working quickly, Lee said, the Hong Kong Commercial Daily reported on Sunday.

The group can provide "recommendations to increase the liquidity of our stock market to strengthen our competitiveness as an international financial center," he said.

Analysts said reducing stamp duty for stock trading in Hong Kong may be one of the options, but the liquidity of Hong Kong stock market also has to do with the Hong Kong dollar's exchange rate.

Due to extremely high interest rate spreads, there is a trend that investors tend to sell Hong Kong dollar to buy the greenback, which is one of the major reasons for inadequate liquidity in the Hong Kong stock market now. Therefore, it's also worth attention whether HKSAR government will conduct reform to its linked exchange rate system, according to analysts.

The global capital market has been facing pressure so far this year, witnessing some stress in the US and European banking sector, sluggish global economic recovery, inflationary pressures and continued geopolitical tensions.

Amid various challenges in the first six months of the year, Hong Kong's securities market saw a drop of 16 percent year-on-year daily turnover to HK$115.5 billion ($14.95 billion), public data showed.

However, there were signs last week that the Hong Kong securities market may soon bottom out, analysts from Guosen Securities said in a research note on the company's WeChat account on Sunday.

"The phenomenon of quantitative South-bound capital seeking bottom-fishing seen in last October may re-emerge," the note read.

Market data showed that South-bound capital continues to buy Hong Kong-based shares in August, with net inflow hitting HK$61 billion. So far this year, net inflow of South-bound capital to Hong Kong-based securities exceeded HK$200 billion.