Hong Kong’s finance chief says record currency reserves give it enough fire power to ward off any attack on currency, recession possible

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

Hong Kong’s hoard of foreign currencies increased 0.6 per cent to an all-time high, bolstering the city’s defences against currency attacks and financial turmoils, as growth in the local economy slows amid unprecedented public 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 was also up from US$445.6 billion in June, according to data released by the Hong Kong Monetary Authority.

The foreign reserves form part of the Exchange Fund, a war chest for maintaining the stability of the city’s currency peg to the US dollar, which has ballooned to HK$4.14 trillion (US$527.7 billion).

“If the third quarter GDP [gross domestic product] shows negative growth, technically Hong Kong will enter into recession,” Chan said at a media briefing 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, Securities and Futures Commission chairman Tim Lui and HKMA chief executive Norman Chan Tak-lam.