Hong Kong’s stock tax hike was a “convenient catalyst” that helped stimulate a healthy correction for the city’s markets, says Tim Moe of Goldman Sachs.
The government announced on Wednesday in its budget that the stamp duty on share transfers will increase from 0.13% to 0.13%.
The move led to strong sales in the broader markets on Wednesday, but stock prices partially fell on Thursday.
The Hang Seng index rose about 1.5% in Thursday afternoon trading, after falling about 3% the day before.
Meanwhile, Hong Kong stock markets and offsets posted more losses, falling around 1.4%, further declining after the previous day’s fall of more than 8%. HKEX operates the city’s stock exchange and on Wednesday saw a year-over-year increase of more than 20% in its 2020 shareholder profits.
“I think it’s important to keep in mind that the overall increase, I mean yes, seems like 30%, but it’s really 3 cents for every hundred dollars of trading; that won’t be nearly the only or sufficient fundamental reason so that people can make an investment decision, ”said Moe, co-director of Asian macro-research and chief strategist in Asia-Pacific equities at the U.S. investment bank.
Our view is that raising the stamp duty was a kind of convenient catalyst for a market that had done very, very well.
Timothy Moe
Head of Asia-Pacific equity strategy, Goldman Sachs
“Our view is that raising the stamp duty was kind of a convenient catalyst for a market that had done very, very well. It’s probably a little above their skis in terms of positioning, valuation and we’ve had what you might call a healthy fix, ”he told CNBC’s“ Squawk Box Asia ”on Thursday.
Despite Wednesday’s heavy losses, the Hang Seng index remains more than 9% higher during the year, as of Wednesday’s close.
In January, Moe told CNBC that mainland Chinese investors contributed significantly to the “very strong start” of Hong Kong shares in 2021.
Looking to the future, Goldman Sachs strategist said Hong Kong markets are likely to continue their upward trajectory once this sell-off period decreases.
“What we would see is a kind of healthy cleaning of an overly expanded positioning, some of the preferred large-property shares sold,” Moe said. “We think that once this type of positioning is overcome, it becomes clear that the market … may continue to make some upward gains at the end of this year.”
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