Newsletter summary
The dividend tax relief policy for Hong Kong stocks is expected to catalyze the sharp rise in financial stocks, the policy dividend period may come, the HKEx and high dividend assets will benefit, the fundamentals of Hong Kong stocks continue to repair, valuations are historically low, and focus on policy and fundamental recovery opportunities.
Text of news flash
[Hong Kong Stock Connect dividend tax relief policy is expected to catalyse a big rise, led by Hong Kong stock financial stocks across the board]
On May 10, Hong Kong financial stocks led the market, with the Hang Seng Financial Index, the Hong Kong Stock Exchange and China Pacific Insurance (H) recording 3.Custombingo.6%, 7.6%, 8.1% increase. The market expects that the dividend tax relief policy for Hong Kong Stock Connect is expected to hit the ground and become a hot spot in the market.
On the occasion of the 10th anniversary of interconnection, the market generally expects Hong Kong stocks to welcome a policy dividend period. In July 2023, the policy deployment of active capital markets highlighted Hong Kong's status as a financial center. In October 2024, a task force on promoting liquidity was set up in Hong Kong. In the same month, the SFC launched five projects of cooperation with Hong Kong to promote the coordinated development of the capital markets of the two places.
The chairman of the Hong Kong Securities Regulatory Commission proposed to optimize the dividend tax on Hong Kong Stock Connect and lower the entry threshold for investors. The move is aimed at protecting the interests of investors and invigorating the capital market. The landing of the loose policy is expected to directly benefit the core hubs of capital markets such as the Hong Kong Stock Exchange, while high dividend assets of Hong Kong stocks will also be positively affected by dividend tax relief.
Potential policies such as firm policies to consolidate Hong Kong's position as an international financial centre and reduction of dividend tax on Hong Kong shares have attracted market attention. At present, the dividend tax rate of Hong Kong Stock Connect individuals and securities investment funds is higher than that of mainland and foreign investors. The optimization of dividend tax relief policy is expected to improve the dividend return of southbound funds and enhance the activity of interconnection.
The total dividend of Hong Kong Stock Connect reached HK $1.7 trillion, and investors earned about HK $150 billion. The 20 per cent dividend yield corresponds to a dividend tax of about 30 billion, and a 10 per cent reduction in dividend tax is expected to exempt individuals and fund investors from tax by about 15 billion, with little impact on fiscal revenue for the year.
Dividend tax relief has a limited contribution to direct profits, but it is expected to improve the medium-and long-term investment returns of Hong Kong stocks. Southward expansion of incremental funds is expected to boost overall trading sentiment in Hong Kong stocks. As the core hub of the capital market, the HKEx has benefited even more.
The fundamentals of Hong Kong stocks continue to repair, the policy area is extremely good, and the valuation of HKEx is highly related to market activity. Hong Kong PE (TTM) is currently valued at 31. 8 times, at about 17 per cent in the last five years and is still at an all-time low. Paying attention to the β opportunities of dividend α catalysis and fundamental repair of Hong Kong stock policy, high dividend assets of Hong Kong stocks are expected to directly benefit from dividend tax relief.
Risk hint: macroeconomic instability may affect trading activity and company listingCustombingoThe Federal Reserve's monetary policy is uncertain; the policy catalysis may be lower than expected; and the landing of corporate strategy may not be as expected.