Thumbs up for reinstating shares stamp duty cap

On Dec 30, 2021, the Finance Ministry (pic) announced that a stamp duty of 0.15% would be imposed on share contract notes, up to a maximum of RM1,000. It said stamp duty amounts exceeding RM1,000 would be remitted and that this remittance would apply to all contract notes from Jan 1, 2022 until Dec 31, 2026.

PETALING JAYA: Investors will enjoy lower transaction costs following the Finance Ministry’s decision to reinstate the cap on stamp duties for the trading of shares on Bursa Malaysia.

In welcoming the move, CGS-CIMB Research said it will make the Malaysian stock exchange more competitive regionally.

On Dec 30, 2021, the Finance Ministry announced that a stamp duty of 0.15% would be imposed on share contract notes, up to a maximum of RM1,000. It said stamp duty amounts exceeding RM1,000 would be remitted and that this remittance would apply to all contract notes from Jan 1, 2022 until Dec 31, 2026.

The government had earlier proposed in Budget 2022 for the stamp duty rate to be raised to 0.15% from 0.1%. It also said the RM200 cap on the duty would be abolished, effective Jan 1, 2022.

CGS-CIMB Research estimated that the government’s latest decision will cut total transaction costs for Malaysia from 0.32% to 0.2% for US$1mil (RM4.2mil) trade value, assuming a brokerage rate of 0.15%.

This is because the stamp duty costs will decline to RM1,000, as compared to an estimated RM6,300 if the stamp duty is removed.

“However, this is still higher than the total transaction costs in 2021 of 0.19%, based on our estimates when the stamp duty cap was RM200.

“Nevertheless, this is positive for stockbrokers and Bursa Malaysia as the higher cap on stamp duty for the next five years will improve Malaysia’s competitiveness against MIST (Malaysia, Indonesia, Singapore and Thailand) peers. We estimate total transaction costs for shares to be 0.16% to 0.26%,” stated CGS-CIMB Research in a note yesterday.

The brokerage pointed out that the FBM KLCI had reacted positively to the reinstatement of the stamp duty cap and window-dressing activities, gaining 23.92 points or 1.55% on the last trading day of 2021.

“This positive is partly offset by concerns over Omicron, the return of intraday short selling effective Jan 1, 2022 and flooding risks in Malaysia,” it said.

The market’s excitement seen in the last trading day of 2021, however, did not last long.

The FBM KLCI began the new year on a weak footing as the benchmark index dropped by 18.48 points or 1.18% to 1,549.05 points yesterday, being the first day of trading.

This appeared to be a reaction to the resumption of IDSS, although Bursa Malaysia director of securities market Azhar Mohd Zabidi had previously told StarBiz that the impact on the market would be minimal.

Meanwhile, CGS-CIMB Research said it was also positive on the government’s decision to extend the tax exemption on foreign sourced dividends for corporates till Dec 31, 2026.