Provident funds with holdings in the Hong Kong dollar debt market are licking their wounds after the steep price falls in debt vehicles last month.
Andrew Fung, chairman of the Hong Kong Financial Markets Association, believes the damage inflicted on the market by the recent price plunge will take a long time to heal.
'The liquidity of the debt market will take a long time to return because provident funds in the debt market and investment banks who enter the market as arrangers have been seriously hit this time. It will take much longer than the stock market to recover,' he said.
The Hong Kong Monetary Authority (HKMA) declared victory over currency speculators last week, having successfully defended the local currency's peg to the US dollar.
However, Mr Fung warned that one cost of defending the peg had been to injure confidence in the Hong Kong dollar debt market.
'The defence of the peg is a priority for the Hong Kong Government, but it has had a negative effect on the development of the Hong Kong debt market,' he said.
