Hong Kong slipped below South Korea to become the world's fifth-largest holder of foreign currency reserves at the end of last month.
The SAR's foreign reserves grew 0.8 per cent to US$112.5 billion, compared with US$112.4 billion at the end of June.
A spokesman for the Hong Kong Monetary Authority said the drop from fourth to fifth place was mainly the result of rapid growth in South Korea's foreign reserves. Japan, the mainland and Taiwan are the world's largest holders of foreign reserves.
At the end of last month, South Korea had reserves of US$115.5 billion, an increase of 2.75 per cent.
Standard Capital Brokerage executive director Louis Tse Ming-kwong said: 'The strong South Korean economy and bullish stock market have attracted a lot of foreign investment, which has resulted in capital inflows and has boosted its foreign reserve level.
'Hong Kong is in the opposite situation - we have a high unemployment rate and an economic recession, which has discouraged capital inflows from foreign investors.'