Stamp duty on REITs in Hong Kong will be officially exempted, which is expected to enhance the competitiveness of REITs in Hong Kong stock market.

　　Our reporter Mao Yirong

　　Hong Kong REITs market once again ushered in good.

　　On December 11th, the Legislative Council of the Hong Kong SAR Government passed the Stamp Duty Legislation (Miscellaneous Amendments) Bill 2024 (hereinafter referred to as the Amendment Ordinance), which exempted the transfer of shares or units of real estate investment trusts (hereinafter referred to as REITs) and the securities distribution business of option makers, and revised the stamp duty collection arrangements under the paperless securities market system in Hong Kong.

　　The Amendment Regulations will be published in the Gazette on December 20th, and the stamp duty exemption for the transfer of shares or units of the REIT fund and the securities distribution business of the option makers will come into effect on December 21st.

　　A spokesman for the Hong Kong SAR Government said: "Exempting the transfer of shares or units of REITs and the stamp duty on securities distribution business of option makers will enhance the competitiveness of Hong Kong REITs and reduce the transaction costs of option makers. Revising the stamp duty collection arrangement will promote the efficiency of stamping and stamp duty collection procedures in the paperless securities market environment. The Hong Kong SAR Government, together with financial regulators and the Hong Kong Exchanges and Clearing Limited (HKEx), will continue to closely follow the changes and needs of the market and study measures to further optimize the stock market in order to enhance market competitiveness and promote its sustainable development. "

　　Buying and selling REITs in Hong Kong will no longer pay stamp duty.

　　As early as the beginning of this year, the Financial Secretary of the Hong Kong SAR Government, Chen Maobo, said in the Budget of the SAR Government for the fiscal year 2024-2025 that in order to further enhance the market competitiveness, the transfer of share units of the Housing Trust Fund and the securities distribution business of option makers will be exempted from paying stamp duty, and it is estimated that the annual income of the Hong Kong SAR Government will be reduced by about HK$ 1 billion.

　　Since the launch of the first real estate trust fund in Hong Kong in 2005, the REITs market in Hong Kong has grown significantly and gradually established its foundation. According to the current Stamp Duty Ordinance of Hong Kong, the sale of REITs is subject to stamp duty, and the tax rate is 0.1% for the buyer and 0.1% for the seller.

　　Dennis Huang, president of Huisheng International Capital Co., Ltd. told the Securities Daily that the move by China and Hong Kong follows the practice of mainstream international markets, including Singapore and Japan. Generally, there is no need to pay stamp duty for buying and selling REITs. This exemption is expected to encourage more REITs to enter the market and enhance the competitiveness of Hong Kong REITs.

　　In the securities distribution business of option makers, the option makers under the Hong Kong Stock Exchange plan to provide trading quotations for the market for investors to trade, thus improving the efficiency and liquidity of the option market. With the continuous development of products in Hong Kong’s securities market in recent years, investment strategies have become increasingly diversified and trading patterns have changed. The trading volume of options has increased significantly, and the demand for options maker services has also increased.

　　According to the Stamp Duty Ordinance of Hong Kong, any person who conducts securities distribution business must prepare transaction documents, and stamp duty of HK$ 5 is required for each transaction document, which is a fixed cost for option makers. At present, except for option makers, market makers of other products are not required to pay relevant taxes.

　　Xu Zhengyu, Secretary for Financial Services and the Treasury of the Hong Kong Special Administrative Region Government, said at the Legislative Council meeting on November 20: "Exempting the stamp duty required for the distribution business of option makers will enhance the efficiency of the option market, further facilitate investors, reduce the cost of option makers, and be in line with the arrangements of other market makers. It is suggested that the relevant business needs to prepare transaction documents and complete stamping requirements. "

　　Investment opportunities in REITs market in Hong Kong are expected to improve.

　　In addition to this exemption from stamp duty, REITs in Hong Kong also welcomed more policy support. On April 26th this year, the Hong Kong SAR Government announced the extension of the "funding scheme for open-end fund companies and real estate investment trusts". The extended funding scheme will be accepted from May 10, 2024. Eligible housing trust funds approved by the Hong Kong Securities Regulatory Commission and listed on the Hong Kong Stock Exchange will be allocated 70% of the eligible fees of Hong Kong service providers, with a ceiling of HK$ 8 million per housing trust fund.

　　In addition, mainland investors are also expected to directly participate in REITs trading in Hong Kong to achieve diversified asset allocation. On April 19th this year, the China Securities Regulatory Commission issued five measures for cooperation between the capital market and Hong Kong. It is mentioned that REITs will be included in Shanghai-Shenzhen-Hong Kong Stock Connect. It is planned to incorporate qualified REITs from the Mainland and Hong Kong into the Shanghai-Shenzhen-Hong Kong Stock Connect with reference to the interconnection system of stocks and ETFs in the two places, so as to further enrich the trading varieties of Shanghai-Shenzhen-Hong Kong Stock Connect.

　　This also means that once this policy is implemented, more mainland investors can directly invest in REITs listed in Hong Kong, and it will also become a catalyst for the further growth, development and maturity of the REITs market in Hong Kong.

　　Up to now, the number of REITs listed in Hong Kong has exceeded 10. Most of them are held by Hong Kong-listed real estate companies, involving various assets such as office, retail, hotels, industrial logistics and commercial complexes.

　　At the same time, the market pays more attention to whether there are investment opportunities in REITs in Hong Kong. Sun Yuanqi, a real estate and REITs analyst in the research department of China International Capital Corporation, believes that the Hong Kong REITs market has overall investment opportunities in the long-term dimension, if viewed in the potential background of the deepening of the RMB southward process. Whether it is the interconnection of the REITs market in the two places or the long-term potential trend that Hong Kong stocks may enter the RMB pricing power as a whole, it is conducive to the overall revaluation of the REITs market in Hong Kong stocks.