An economist said on Monday that stamp duty on stock transactions should be lowered to strengthen liquidity in Hong Kong’s market.

Andy Kwan, director of ACE Centre for Business and Economic Research, made the comment after Chief Executive John Lee announced that the government will launch a task force to try to boost the SAR’s stock market.

Shares were sharply higher in Hong Kong and on the mainland on Monday morning after mainland authorities halved stamp duty on stock trading.

Kwan said the SAR should make the same move, not only to help build investor confidence, but also to attract more funds from overseas.

"Right now, the stamp duty is quite high relative to other markets and in terms of the cost of transaction, it's another item the financial secretary has to consider. I remember the last time the FS increased the stamp duty instead of lowering it, it made the market less attractive. If you look at the daily transactions, it really came down," Kwan said.

"In this case, if you really go the opposite way and lower the stamp duty, it will make the cost of transactions lower and this will attract more retail traders in the market."

Kwan said the task force could also increase liquidity by lowering the minimum stock size, to bring down entry fees and attract more investors.