Don't get burnt on hot money flowing into Hong Kong, investors warned
Don't get burnt, say officials as billions flowing in ahead of cross-border stock scheme could leave due to poor outlook and US rate rise
The government has increased its monitoring of capital flows as finance officials and brokers warn that billions in "hot money" flowing into the city to bet on the stock market could leave just as quickly due to a poor economic outlook and fears of a US interest rate rise.
"The government will keep a close eye on the risks of fund flows in and out of the city," Secretary for Financial Services and the Treasury Chan Ka-keung said yesterday.
The Hong Kong Monetary Authority has repeatedly intervened in the currency market since the beginning of last month to sell almost HK$70 billion as the influx of funds boosted the Hong Kong dollar to the upper end of its trading band. Under the peg to the US dollar, the HKMA is obliged to intervene to keep the Hong Kong dollar trading at between 7.75 and 7.85 to the US currency.
Many stockbrokers said the influx was due to the October launch of a scheme that would allow investors to conduct cross-border trading of stocks in Hong Kong and Shanghai. Others say funds are also coming from Russia due to the unrest in Ukraine.
In July, the benchmark Hang Seng Index rose 6.8 per cent while the H-share index gained 7.7 per cent. Monthly turnover increased 39 per cent from June.
Chan warned investors that the money could leave just as easily due to the gloomy economic outlook.