Hong Kong's new Policy Address will be released on September 17. Chen Zhihua, Chairman of the Hong Kong Securities and Futures Professionals Association, suggests that authorities could reduce or cancel stock stamp duty in three phases, expecting that lower transaction costs would enhance market depth. He also mentioned that the Growth Enterprise Market (GEM) lacks overall vitality due to various regulations and approval processes, failing to fully fulfill its role in providing financing support for small and medium enterprises. It could learn from the US NASDAQ market's tiered system, establishing differentiated listing standards for companies of different scales and development stages.
Chen Zhihua stated that under the current market structure and related listing regulations, most small and medium enterprises in high-growth and development stages cannot list on the Hong Kong Stock Exchange for various reasons. Although the GEM Listing Rules do not require profitability, their requirements for operating cash flow, market capitalization, R&D expenses, and lengthy IPO approval processes have resulted in GEM's overall lack of vitality, making it less attractive to investors and issuers, and excluding smaller companies with growth potential.
For the GEM board, he suggests that the Hong Kong Stock Exchange could learn from the US NASDAQ market's tiered system, establishing differentiated listing standards for companies of different scales and development stages. For technology and innovation companies, relax cash flow or revenue requirements, and in addition to existing financial qualification tests, add more evaluation indicators such as user growth numbers and market share. For emerging industries and companies with great potential but unclear short-term profitability, provide more listing opportunities.
Regarding stock stamp duty, he suggests that phased reduction or cancellation of stamp duty policy should be considered, implemented in three stages. In Phase 1, conduct pilot reductions, with stamp duty further reduced from 0.1% within 6 to 12 months. In Phase 2, further reduce exemptions, with stamp duty further reduced from the first phase within 12 to 24 months, and introduce a "stamp duty tax credit" mechanism, expecting increased trading volume compared to Phase 1 and enhanced institutional long-term M&A willingness. In Phase 3, complete abolition within 24 to 36 months, fully canceling stamp duty while simultaneously revising trading levies to maintain regulatory and exchange operating funds, expecting transaction costs to drop to among the world's lowest and enhance market depth.
He also stated that under the current mechanism, public disclosure of regulatory warnings often accompanies severe stock price volatility. The "sudden" nature of warnings: the current approach is like "actively detonating," lacking a warning period. Regulatory agencies possess key information, while the market (including minority shareholders) remains completely in the dark before warning announcements. This information gap objectively places minority shareholders in the same passive position as major shareholders, or even suffering greater impact due to lack of buffer.
He suggests that regulatory authorities review current procedures, noting that this would give responsible parties opportunities for correction: with fairness as the premise, allowing major shareholders/companies time to take substantial action to improve shareholding structure. Meanwhile, regulatory agencies should strictly monitor trading behavior of major shareholders and listed companies, preventing insider trading or improper share reductions, ensuring minority investors' interests are not harmed.
Regarding stock options, he pointed out that since most trading in the stock options market relates to arbitrage and hedging activities, its development can add additional liquidity to the overall market, strengthen price discovery mechanisms, improve market efficiency and depth, thereby benefiting other market products. This will help boost overall trading volume and consolidate Hong Kong's position as an international financial center.
He stated that the association suggests establishing a precise and efficient rapid inclusion mechanism, quickly launching weekly and monthly stock options for suitable stocks to improve the breadth and depth of stock option products, optimize market structure, enhance international competitiveness, and avoid letting the US market dominate in this field.
Additionally, regarding the Policy Address, Eddy Hui, Executive Director and CEO of Bright Smart Securities, suggests that the government subsidize small securities firms to help them improve relevant facilities, promoting their joint growth with Hong Kong's financial market to achieve a "hundred flowers blooming" situation, rather than only supporting a few large securities firms. However, he believes that although Hong Kong's stock stamp duty is currently expensive, it is currently "supported by stamp duty," considering stamp duty reduction as "secondary."