XN000022-1994-06-01 — Page 12

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WEDNESDAY, JUNE 1, 1994

STAMP DUTY CONCESSION FOR STOCK BORROWING AND LENDING

* * * * *

THE STAMP DUTY (AMENDMENT) (NO.2) BILL 1994 AND THE INLAND REVENUE (AMENDMENT) (NO.2) BILL 1994 WILL BE INTRODUCED INTO THE LEGISLATIVE COUNCIL ON JUNE 15 TO RELAX THE STAMP DUTY CONCESSION FOR STOCK BORROWING AND LENDING ACTIVITIES, SECRETARY FOR FINANCIAL SERVICES, MR MICHAEL CARTLAND, SAID TODAY (WEDNESDAY).

THE FINANCIAL SECRETARY MENTIONED IN HIS BUDGET FOR 1994/95 STAMP THAT PROPOSALS WOULD SOON BE PUT FORWARD FOR THE EXEMPTION FROM DUTY OF STOCK BORROWED UP TO 12

THE TWO BILLS SERVE THIS

PURPOSE.

MONTHS.

NOT

AT PRESENT, A STOCK BORROWING AND LENDING TRANSACTION WILL GIVE RISE TO STAMP DUTY LIABILITY IF IT IS CARRIED OUT BY AN APPROVED BORROWER FOR THE SOLE PURPOSE OF SETTLING A SALE OF HONG KONG STOCK AND THE BORROWED EFFECTED IN THE STOCK EXCHANGE OF HONG KONG (SEHK) STOCK MUST BE RETURNED WITHIN 14 DAYS.

SUCH ARRANGEMENTS WERE

1989 то HELP RESOLVE TEMPORARY DELAYS IN THE WHERE THE STOCK IS HELD

GENUINE DELIVERY OF OVERSEAS.

SETTLEMENT

STOCK

INTRODUCED IN PROBLEMS CAUSED BY SOLD, FOR INSTANCE,

END, MARKET

MR CARTLAND SAID: "THE MEASURES WERE SATISFACTORY TO THAT BUT THE GOVERNMENT HAD NEVERTHELESS RECEIVED SUBMISSIONS FROM PRACTITIONERS THAT THE CURRENT STAMP DUTY RELIEF WAS TOO RESTRICTIVE FOR THE DEVELOPMENT OF THE STOCK BORROWING AND LENDING MARKET IN KONG WHICH IN TURN WAS CRUCIAL FOR THE SHORT-SELLING OF SECURITIES.

"THE SHORT STOCK RETURN PERIOD, THE SOLE AND THE NEED TO CONDUCT THE TRANSACTION THROUGH AN ARE THE MAJOR CONCERNS,

STOCK BORROWING

HE SAID.

IS A TOOL TO

HONG

PURPOSE REQUIREMENT APPROVED BORROWER

FACILITATE SHORT-SELLING OF SECURITIES FOR, SAY, HEDGING A LONG POSITION IN FUTURES/OPTIONS CONTRACTS.

SHORT-SELLING

THE SECURITIES ORDINANCE IN EFFECT PROHIBITS THE OF STOCKS UNLESS A BROKER OR HIS CUSTOMER CAN PROVIDE THE NECESSARY STOCK FOR SETTLEMENT. IF HE DOES NOT HAVE THE STOCK AT HIS DISPOSAL, HE WOULD HAVE TO BORROW IT IN THE MARKET.

THE SEHK INTRODUCED REGULATED LISTED SECURITIES IN JANUARY 1994.

SHORT-SELLING FOR SELECTED

THE HOWEVER,

STOCK BORROWING

AND LENDING MARKET AND

SHORT-SELLING HAVE REMAINED INACTIVE.

RESTS

THE PRIMARY REASON

WITH THE CURRENT RESTRICTIONS ON STAMP DUTY CONCESSION FOR STOCK BORROWING AND LENDING.

MONTHS

TO ADDRESS THE PROBLEM, THE STAMP DUTY (AMENDMENT) (NO.2) SEEKS TO EXTEND THE STOCK RETURN PERIOD FROM 14 DAYS TO 12 SUCH LONGER PERIOD THE COMMISSIONER OF INLAND REVENUE MAY ALLOW.

BILL

OR

/IT IS