(Yicai) Aug. 15 -- Hong Kong, which raised its stamp duty on stock sales two-and-a-half years ago, should revert back to the original 0.1 percent tax as the hike is affecting the stock market’s trading volume and eating into investors’ profits, according to an industry body. But there are still divided opinions among industry professionals about the impact of adjusting the stamp tax.

The increased stamp duty on stocks has severely affected transactions on the Hong Kong stock exchange and is hurting investors, the Hong Kong Securities and Futures Professional Association said on Aug. 9. 

The association was responding to a solicitation of public opinion by the Hong Kong government ahead of an address on policy by the special administrative region’s Chief Executive John Lee on Oct. 25.

Hong Kong increased the stamp tax to 0.13 percent from 0.1 percent in February 2021, which made the costs to trade stocks in Hong Kong about three times as much as in the mainland.

The costs of trading stocks on the Hong Kong bourse are high, Sam Chi Yung, head of research at online brokerage Doo Financial, told Yicai. It would be better if the tax is lowered back to 0.1 percent or even canceled, but the administration will need to consider the impact on fiscal income, he added.

Other industry players, though, believe that the sluggish stock market actually has little to do with the high stamp tax.

Hiking the stamp duty has not affected the market capitalization of Hong Kong-listed firms, a fund manager based in Shenzhen said. This is because most investors on the stock exchange are large institutions with a medium to long-term view. Therefore, trading costs are not their main consideration. More strongly performing companies going public is what the market needs most as they will make it more prosperous.

Canceling the stamp duty will definitely boost trading volume, said Wan Ten Lap, non-executive chair at Partners Capital International. But there are other factors, such as geopolitical tensions, that are contributing to the low trading volume and these will continue to impact the stock market this half and more attention needs to be paid to them.

Hong Kong's stock market has undergone adjustments for over 20 months, but the Hang Seng Index has stayed below 20,000 points.

Editors: Shi Yi, Kim Taylor