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Old July 13th, 2014, 05:57 AM   #81
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HKMA intervenes to defend Hong Kong's dollar peg, sells HK$2.325 bln

HONG KONG, July 11 (Reuters) - The Hong Kong Monetary Authority (HKMA) stepped into the currency market and sold HK$2.325 billion ($300 million) in Hong Kong dollars on Friday as the local currency hit the strong end of its trading range.

According to the HKMA, the latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to HK$192.768 billion by July 15.
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Old July 15th, 2014, 04:14 PM   #82
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HKMA intervenes to protect HKD peg, sells HK$1.94 bln

HONG KONG, July 14 (Reuters) - The Hong Kong Monetary Authority (HKMA) stepped into the currency market on Monday, selling HK$1.94 billion ($250.34 million) in Hong Kong dollars as the local currency repeatedly hit the strong end of its allowable trading band.

The latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to HK$202.9 billion on July 16, according to Reuters data.

The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85.

Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact.

($1 = 7.7499 Hong Kong dollars)


HKMA intervenes again to defend Hong Kong's dollar peg, sells HK$2.7 bln

HONG KONG, July 15 (Reuters) - The Hong Kong Monetary Authority (HKMA) stepped into the currency market again on Tuesday, selling HK$2.71 billion ($349.68 million) in Hong Kong dollars as the local currency repeatedly hit the strong end of its allowable trading band.

The latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to HK$207.57 billion on July 17, according to Reuters data.

The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85.

Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact. ($1 = 7.7500 Hong Kong Dollars)
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Old July 19th, 2014, 07:59 AM   #83
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Hong Kong's defence of currency peg fails to smoothen money market bumps

HONG KONG, July 16 (Reuters) - A rare spell of tightness in Hong Kong money markets in the past three weeks, stemming from unusually high demand for the city's currency, could persist until the end of July despite heavy intervention by authorities, analysts said.

The confluence of flows has led, ironically, to the pegged Hong Kong dollar bumping against the strong end of its band against the U.S. dollar at the same time that local short-term lending rates have moved up.

Over the last two weeks, the Hong Kong Monetary Authority (HKMA), the city's de-facto central bank, has sold 43.7 billion Hong Kong dollars ($5.64 billion) to contain the local currency's appreciation.

Yet Hong Kong dollars remain in short supply as capital inflows have either been locked up for large corporate acquisitions and equity issues, or been diverted towards dividend payments and foreign currency assets.

"The situation is quite unusual as the HKMA's intervention should lead to easier money market conditions" but instead interbank rates for Hong Kong dollars have risen, said an executive director at a currency hedge fund in Hong Kong.

Compared with rate changes some years ago, especially during the global financial crisis, the magnitude of the recent hike is "still small but it merits watching", he said.

Analysts believe the completion of corporate deals and fund-raising, along with the HKMA intervention, should help restore cash levels to normal by the end of this month. They believe the gentle rise in rates will not develop into a prolonged spike.

The cash squeeze has come at a time when the city has seen a spike in capital inflows seeking to profit from a revival in the local property market and a spate of Chinese equity listings on the local stock exchange.

The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85. Under a currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits either end of the band.

Hong Kong introduced the peg in 1983, amid evaporating confidence as China and the UK negotiated the future of what was then a British colony. The peg has helped Hong Kong become a major financial centre and trade hub.

In the past two weeks, one- and six-month interbank rates in the Hong Kong dollar have risen by four to five basis points - a large move by the local market's standards - while interest rate swaps whose movements are tied to these rates have also edged higher.

ANNUAL FACTORS, AND MORE

A squeeze in Hong Kong dollar cash markets began in late June, and was rooted in annual factors: precautionary demand from banks because of their half-yearly reporting needs, plus funds owed for corporate dividend payments.

Traders say the squeeze was exacerbated by banks in Hong Kong hoarding funds ahead of a pro-democracy march on July 1, seen as a significant challenges to Chinese Communist Party rule. Activists had threatened to lock down the main business district if Beijing and the Hong Kong government didn't propose reforms leading to full democracy. Police forcibly removed protesters after their rally.

The crunch continued, related to deals and a revival of initial public offerings (IPOs). June was Hong Kong's second-highest month for IPOs this year at $3.2 billion, according to Thomson Reuters data.

Singapore's Oversea-Chinese Banking Corp has been seeking to complete a proposed $4.95 billion takeover of Hong Kong's Wing Hang Bank Ltd, and the money appears to be locked up already.

"Typically when a deal gets close to finishing, the banks have to lock up funding, so the supply of funds in the interbank market drops," said the hedge fund trader.

Other factors adding pressure on the Hong Kong dollar and the cash crunch include a longer-term trend of cheap local currency funds being converted into foreign currency assets.

Hong Kong dollar loans for use outside the territory as a percentage of total loans have grown nearly seven fold to 13.2 percent from 10 years ago, said Frances Cheung, a senior strategist at Credit Agricole.

Standard Chartered strategists estimate there were capital inflows of 151 billion Hong Kong dollars in the three months to May compared to 107 billion Hong Kong dollars of outflows in January-February, and they say inflows continued in June and early July. ($1 = 7.7499 Hong Kong Dollars)
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Old July 27th, 2014, 05:21 PM   #84
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Hong Kong must stay alert to capital outflows despite currency's strength -HKMA

HONG KONG, July 27 (Reuters) - Hong Kong must stay alert to the possibility of large capital outflows even as its currency has had unusual strength recently due to inflows for acquisitions, share-dividends and related transactions, a senior official at its central bank said.

Since July 1, the local dollar has repeatedly hit the strong end of the currency peg to the U.S. dollar. That caused the Hong Kong Monetary Authority, the de-facto central bank, to absorb more than $5.6 billion in inflows and inject more than 40 billion Hong Kong dollars into local money markets.

While the inflows will likely boost prices and increase liquidity, Peter Pang, the HKMA's deputy chief executive warned that the turmoil seen in emerging markets last year due to large-scale outflows showed that fund flows could change directions quickly.

"As the U.S. economy recovers and its monetary environment normalises, there remain considerable uncertainties in the future direction of fund flows," Pang said in an article posted on HKMA's website Saturday night.

Pang cited four reasons for the local dollar's recent strength: large dividend payments by local companies, a rise in cross-border deal activity, precautionary demand by banks due to the half-yearly close and likely investor positioning ahead of the launch of a cross-border stock exchange programme.

Citic Pacific's acquisition of its parent's assets and the purchase of local lender Wing Hang Bank by Singapore's OCBC totalled nearly 100 billion Hong Kong dollars ($12.90 billion) while dividend distributions by locally-listed companies are set to hit 200 billion Hong Kong dollars, according to the HKMA.

The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits either end of the band.

Hong Kong introduced the peg in 1983, amid evaporating confidence as China and the UK negotiated the future of what was then a British colony. The peg has helped Hong Kong become a major financial centre and trade hub.
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Old September 2nd, 2015, 06:23 AM   #85
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Sep 2, 2015
HKMA injects HK$15.5 bln to defend currency peg
Hong Kong Economic Journal Excerpt







Hong Kong’s de facto central bank intervened in the foreign exchange market in two moves Tuesday as the local currency repeatedly hit the upper end of its trading range against the US dollar.

Authorities were forced to step into the market as the local unit has been appreciating amid a selloff of the renminbi, the Hong Kong Economic Journal reported.

The Chinese currency’s recent slide has prompted many investors to switch out of the renminbi and move into Hong Kong dollars.

As the local unit hit 7.75 to a US dollar, the strong end of its allowed trading range, the Hong Kong Monetary Authority (HKMA) had to intervene to defend the currency peg.

In two moves Tuesday, the HKMA injected a combined HK$15.5 billion into the market.

The injections, which marked the first such moves since April, will send the interbank aggregate balance to HK$306.17 billion.
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Old September 10th, 2015, 04:40 AM   #86
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Hong Kong Dollar Peg Shows Strain Caught Between Fed and PBOC
Bloomberg Excerpt
September 9, 2015

Hong Kong’s 32-year-old currency peg is seen coming under strain, caught in a tug-of-war between tightening U.S. monetary policy and an economic slump in China.

The linked exchange rate means Hong Kong has no choice but to follow the Federal Reserve in raising interest rates, which is forecast to happen before the end of this year. At the same time, China’s slowest growth since 1990 will exert downward pressure on the city’s property prices and wages, fueling public discontent towards the peg, according to BNP Paribas SA.

"It’s a double whammy," Mole Hau, a Hong Kong-based economist at France’s largest bank, said in an interview. "Hong Kong is more integrated with China now and so its economy could be dragged by China’s slowdown. On the other hand, Hong Kong’s monetary policy has to follow that of the U.S. -- that’s quite a dis-coordination for the city."

The chances for an end to Hong Kong’s peg jumped to a decade-high last month in the options market after a surprise devaluation of the yuan triggered depreciation across the region as well as exchange-rate regime changes in Kazakhstan and Sri Lanka. That market instability spurred demand for Hong Kong dollars, forcing the monetary authority to buy $4.7 billion this month to keep the local currency from strengthening.

The flows reflect confidence in the resilience of a currency link that’s survived a change of sovereignty in 1997, a 1998 attack by speculators during Asia’s financial crisis as well as the 2008-2009 global financial crisis and almost three months of pro-democracy protests in late 2014. The Hong Kong Monetary Authority reiterated this month a pledge to maintain the stability of the local currency, which is allowed to trade in a range of HK$7.75 and HK$7.85 versus the greenback.
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Old September 14th, 2015, 03:40 PM   #87
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HKMA sells HK$6.59 bln to keep Hong Kong dollar in trading band

HONG KONG, Sept 14 (Reuters) - The Hong Kong Monetary Authority (HKMA) stepped into the currency market and sold HK$6.59 billion ($850.33 million) in Hong Kong dollars on Monday as the local currency hit the strong end of its trading range.

According to the HKMA, the latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the authority - to HK$333.533 billion on Sept. 16.
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Old November 24th, 2015, 03:48 AM   #88
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End of HK dollar seen in yuan rise
The Standard Excerpt
Tuesday, November 24, 2015

The Hong Kong dollar will disappear once the yuan becomes freely convertible, global investor Jim Rogers said yesterday.

It will be a much more efficient and cheaper system if people need not convert their currencies to trade or to come here, the American investor said.

Rogers said the disappearance of Hong Kong's currency "would not be shocking," as has happened with many currencies in the past.

He also believes Beijing will allow mainland stock markets to hit their "natural bottom" and start over.

Rogers said this was better than intervening in the market which Beijing has done before as this only succeeds in "making people feel better in the short term."

He hopes mainland regulators would stop hindering short selling as this is a good way to prevent stocks being priced too low or too high.
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Old January 14th, 2016, 09:31 AM   #89
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Hong Kong Dollar Drops Most Since '11 as Bets Mount on Peg's End
Bloomberg Excerpt
January 14, 2016

The Hong Kong dollar sank by the most in four years and speculation mounted in the options market that the city’s 32-year-old currency peg will break as investors lose confidence in Chinese assets.

The local currency dropped as much as 0.18 percent -- its biggest intra-day loss since July 2011 -- to HK$7.7738 versus the U.S. dollar as a gauge of expected price swings was set for its highest close since 2003. The Hang Seng Index of shares fell 0.3 percent as of 2:38 p.m. local time and the offshore yuan weakened 0.4 percent, having slipped to a five-year low last week.

Hong Kong’s fortunes are increasingly entwined with those of China, an economy that’s forecast to expand this year at the slowest pace since 1990, and the local currency’s linkto the U.S. dollar can come under pressure when sentiment toward the mainland deteriorates. The yuan has fallen 5.8 percent in Shanghai since a surprise devaluation on Aug. 11, even as the central bank burnt through $321 billion of its foreign-exchange reserves supporting the currency over the last five months.

While the yuan’s depreciation does drive haven demand for the Hong Kong dollar, "another dynamic has entered the equation and that dynamic is a potentially large devaluation of the renminbi," said Mirza Baig, head of foreign-exchange and interest-rate strategy for Asia Pacific at BNP Paribas SA in Singapore. "That dynamic has perhaps become a bit more acute in recent days. If the renminbi weakens a lot, I don’t see how Hong Kong would escape speculation of de-pegging as well."
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Old January 16th, 2016, 05:28 PM   #90
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Hong Kong dollar in worst fall since SARS crisis in 2003
Excerpt

HONG KONG, Jan 14 (Reuters) - The Hong Kong dollar posted its worst fall in 12 years against the greenback in late Asian trade on Thursday, as bets on more yuan depreciation spilled over to the local currency market.

Traders reported funds selling the Hong Kong dollar against the greenback with some companies also pulling back from converting their offshore yuan deposits into the local dollar.

The sharp drop in the local dollar - its biggest since late 2003 when a deadly outbreak of Severe Acute Respiratory Syndrome (SARS) swept the former British colony - took market participants by surprise and pulled the currency from the stronger end of its trading band.

"The offshore yuan has been falling again today which has put pressure on the Hong Kong dollar," said Kenix Lai, a senior market analyst at Bank of East Asia in Hong Kong.

"Hong Kong is facing headwinds with the Hang Seng index below 20,000 and sentiment in the retail and property markets remaining weak."

In late afternoon trade, the local dollar suddenly sank to 7.7810 per dollar, its lowest since December 2011 from 7.7605 earlier, a large move for a pegged currency. It closed at 7.7620 per dollar on Wednesday.

During periods of intense pressure on the renminbi in the past, such as in last August when the currency was devalued, the Hong Kong dollar becomes a proxy currency.

Traders said there was also some unwinding of Hong Kong dollar carry trades, using the local dollar to fund Chinese assets, as well as some funds aggressively buying dollars.

The move in the cash market was accompanied by a spurt in trading volumes and a rise in implied volatility - a gauge of expected currency swings - in the derivatives markets.
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Old January 20th, 2016, 04:12 PM   #91
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What's Hounding the Hong Kong Dollar
Bloomberg Excerpt
January 20, 2016

Hong Kong dollar forwards have sunk to their weakest level this century. Worsening sentiment toward Chinese assets has spurred capital outflows. Some investors are speculating the city will end its 32-year-old currency peg.

Twelve-month contracts fell as much as 0.3 percent to HK$7.8904 versus the greenback. That's beyond the HK$7.75-HK$7.85 range that the currency can trade within under the existing exchange-rate system. The Hong Kong dollar dropped as low as HK$7.8229. The Hong Kong Interbank Offered Rate for three-month loans of 0.55 percent is the highest since June 2010.
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Old April 8th, 2016, 06:23 PM   #92
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7 April 2016
The Standard Excerpt
HK$ will disappear, say experts

The Hong Kong dollar will eventually be phased out of circulation, according to a survey of UK and locally educated experts.

The poll, conducted recently by the London Business School and the University of Hong Kong, found that 62 percent of the 225 respondents do not think there is a future for the local currency.

"In one sense, the 'one country, two systems' arrangement for Hong Kong will eventually come to an end, so that would mean the end of a separate currency in any case," said Linda Yueh, adjunct professor of economics at London Business School.

"Whether it's good or bad for the economy of Hong Kong will depend more on how the structure of the economy is rather than just the currency."

More than half, or 58 percent, of respondents believe there should be a more widespread acceptance of the yuan in local shops and leisure outlets at present, due to the SAR's reliance on mainland tourists and declining currency transaction costs.

But three-fourths of respondents would be disappointed if the Hong Kong dollar was phased out, with the loss of political independence and the stability of the SAR as a financial center.

The survey also found that respondents believe by 2030 the yuan will be one of the top three major currencies, together with the US dollar and euro. About 84 percent expected the yuan to be a serious contender for the global league in less than 10 years.
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Old April 16th, 2018, 05:53 AM   #93
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Why Hong Kong's Dull Dollar Has Investors Excited: QuickTake
April 12, 2018
Bloomberg Excerpt

Pegged to the U.S. dollar since 1983, most of the time the Hong Kong dollar is the dullest currency around. But this past year has been different: It has been falling and falling until in April it finally breached the point at which the central bank must intervene -- and it did, by purchasing the Hong Kong dollar. Sustained buying by the Hong Kong Monetary Authority would be eagerly watched by home owners and investors, since it might spell the end for the era of easy money that has helped drive housing prices and the stock market to record levels.

1. Why has the Hong Kong dollar been so weak?
Primarily because the interest rates that matter in Hong Kong haven’t risen in tandem with U.S. rates, making it more attractive for investors to sell local dollars and buy higher-yielding U.S. dollars. The premium of the U.S. interbank rate, known as Libor, over Hong Kong’s equivalent, Hibor, has reached its widest point since 2008.

2. Why are interest rates stuck?
Simply put, an abundance of liquidity. As one of the main global financial hubs, Hong Kong has drawn massive inflows as a result of monetary easing by the world’s major central banks and an exodus of capital from mainland China. Investors there have been moving funds into markets including Hong Kong to diversify their portfolios. Those inflows mostly remain in Hong Kong, meaning banks are flush with cash. In such circumstances, there is no pressure for them to raise interest rates.

3. Why doesn’t Hong Kong mirror the Fed’s interest rate moves?
Every time the Federal Reserve lifts its benchmark interest rate, the HKMA does indeed raise its base rate -- but with little effect. That’s because the base rate is the rate at which the authority offers overnight funds to banks -- hardly relevant when the banking system is brimming with cash. The real rate to watch is Hibor: It’s the floating rate on most new mortgages and will be the first indicator of tightening liquidity. Another rate that matters is the prime rate, which is often the basis of a cap on mortgages. It is set by each of the banks; none of the major lenders has changed its prime rate since 2008.

4. When did the Hong Kong Monetary Authority intervene?
Hong Kong sets a range for its currency to trade in: $HK7.75 to HK$7.85 per U.S. dollar. For the first time since 2005, it breached the weaker end of the range on April 12. Later that day, the central bank bought the Hong Kong dollar, as it is mandated to, at the lower limit of HK$7.85. The HKMA has sold Hong Kong dollars from time to time in the past decade including after the global financial crisis. But the previous time it bought the currency was shortly before the new band was implemented in 2005, to curb inflows betting on a stronger Chinese yuan.

5. So is the currency under attack by speculators?
The current move to the weak end of the band has been well anticipated and has come without the fireworks associated with speculative attacks on pegged currencies. With record foreign-exchange reserves, the central bank is seen as having the capacity to comfortably shoot down speculators.

More : https://www.bloomberg.com/news/artic...-quicktake-q-a
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Old July 4th, 2019, 03:02 PM   #94
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Hong Kong rates hit 2008 highs, HK$ rallies before jumbo InBev IPO
Excerpt

HONG KONG, July 4 (Reuters) - The Hong Kong Interbank Offered Rate (HIBOR) rose across the curve on Thursday, with investors scrambling for cash ahead of the world's biggest initial public offering of the year at a time of tight liquidity in the domestic market.

Brewer Anheuser-Busch InBev NV (AB InBev) is seeking to raise up to $9.8 billion by listing its Asia-Pacific business in Hong Kong this month.

On Thursday, the one-month and two-week tenors shot up to 2.99% and 3.53%, respectively, their highest since October 2008, while two-month and three-month HIBOR reached their highest levels since November of the same year.

New York-listed internet giant Alibaba is also hoping to raise up to $20 billion in Hong Kong's stock market this year, which would be the largest secondary listing globally in seven years.

"We haven't seen such a large IPO for a while, and it is happening during the dividend season when liquidity is usually tight," said Carie Li, an economist at OCBC Wing Hang Bank, commenting on the AB InBev listing.

Analysts from Bank of America Merrill Lynch estimated in May that Hong Kong-listed Chinese companies will need to pay $55 billion of dividends this year, mostly in June and July.

HIBOR's climb lifted the Hong Kong dollar to its strongest since May 2017. The currency was seen at 7.7893 per dollar, up 0.1% on the day. It is pegged to the U.S. dollar at a tight range of 7.75 to 7.85.

More : https://www.reuters.com/article/us-h...-idUSKCN1TZ0SM
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Old July 16th, 2019, 06:57 PM   #95
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Hong Kong Is Expected to Hire an Insider for Monetary Authority
Bloomberg Excerpt
July 16, 2019

Hong Kong’s government is expected to select an insider to run the city’s monetary authority, as the crisis gripping the city highlights the institution’s role as the protector of the all-important peg to the dollar.

Norman Chan, chief executive of the Hong Kong Monetary Authority, will retire on Oct. 1 at the end of his second five-year term. Financial Secretary Paul Chan is chairing a panel to identify the central banker’s successor. Reports in local media suggest the current deputies are the likeliest candidates for the top job.

The system that pegs the Hong Kong dollar to the greenback at a rate of about HK$7.80 has been in place since 1983, with the HKMA intervening when the trading band is tested. That pillar of stability is all the more vital now as protests against a proposed extradition bill form the most serious political crisis since the return to Chinese rule.

More : https://www.bloomberg.com/news/artic...rency-guardian
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Old August 12th, 2019, 04:13 PM   #96
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South China Morning Post Excerpt
Attack on HK dollar Futile, Paul Chan says
Aug 8, 2019

Financial Secretary Paul Chan Mo-po yesterday *noted that any attack on the *currency could be dealt with *adequately, given its strong banking system and record currency reserves, and at the same time warned there was a real possibility the city could slip into recession.

Hong Kong's hoard of foreign reserves increased by 0.6 per cent to an all-time high, bolstering the city's defences against currency attacks and financial turmoil, as growth in the local economy slows amid unprecedented social unrest and effects of the deteriorating US-China trade war.

Foreign exchange holdings, excluding gold, rose to US$448.5 billion at the end of July from US$431.9 billion a year ago, and were also up from US$445.6 *billion in June, data released by the Hong Kong Monetary *Authority (HKMA) showed.

The foreign reserves form part of the Exchange Fund, a war chest used to maintain the stability ofthe city's currency peg to the US dollar, which has ballooned to HK$4.14 trillion.

"If the third-quarter GDP[gross domestic product] shows negative growth, technically Hong Kong will enter into recession," Chan said after hosting the first Financial Leaders Forum since the protests started.

The forum comprises 10 members and includes Hong Kong Exchanges and Clearing chairwoman Laura Cha Shih May-lung, Securities and Futures *Commission chairman Tim Lui Tim-leung and HKMA chief executive *Norman Chan Tak-lam.

"The Exchange Fund has over HK$4 trillion of assets to defend the peg. The local banks hold HK$1 trillion of Exchange Fund bills, which can provide ample *liquidity to the banking industry," Chan added.

The record reserves are a much-needed boost for an *economy that undershot all expectations in the second quarter, after a June 9 protest march kicked off a movement that has deteriorated into daily street rallies and mayhem. The economy grew by 0.6 per cent in the second quarter from a year earlier, but contracted by 0.3 per cent compared with the first three months of the year.

As the trade war *between China and the United States has *descended into an all-out conflict involving technology and currencies, Hong Kong's economy was buffeted by the effects.

The Hong Kong dollar, which has been pegged to the US dollar since 1983, weakened on Monday to the lower end of its trading band. *Borrowing costs in the city soared, with the overnight interbank *offered rate, or Hibor, jumping by 50 basis points.

Chan said the liquidity ratio of banks stood at 160 per cent, higher than the 100 per cent international banking standard, while Hong Kong lenders' capital *adequacy ratio stood at 20 per cent, double the international requirement.
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