Hong Kong’s September dollar deposits and financial war chest expand, defying months of street protests and year-long trade war
- Local currency deposits grew 0.6 per cent in September to HK$6.88 trillion, reversing a dip in August, as investors converted capital into Hong Kong dollars ahead of several blockbuster stock offerings
- The financial war chest used to defend Hong Kong’s dollar grew 1.6 per cent to a five-month high of HK$4.229 trillion, the HKMA’s data show
Hong Kong’s dollar deposits rose in September, helping to push the city’s financial war chest to a five-month high, as the banking system in one of Asia’s premier financial centres held steady against five months of unprecedented civic strife and the effects of a year-long US-China trade war.
September’s Hong Kong dollar deposits grew 0.6 per cent, or by HK$41.47 billion, to HK$6.88 trillion (US$878 billion), according to data released by the Hong Kong Monetary Authority (HKMA), as investors converted capital into the local currency ahead of several blockbuster stock offerings on the city’s stock exchange.
The Exchange Fund, the war chest used to maintain the stability of the local currency, grew by 1.6 per cent, or HK$6.6 billion, to HK$4.229 trillion at the end of September, the highest since a record in April, the data showed.
“There were many large listings in September, which spurred the public’s demand for Hong Kong dollars to subscribe to the stocks,” said the HKMA’s chief executive Eddie Yue Wai-man, during a press conference. “A stable Hong Kong dollar deposit [figure] shows there is no massive capital outflow from Hong Kong’s financial system.”
September’s increment was a reversal of the 1.6 per cent decline recorded in August, when the second month of Hong Kong’s worst political crisis degenerated into bouts of violent clashes between police and protesters, sending some people to move their funds out of the city. Local currency deposits fell to HK$6.84 trillion in August from a month earlier.
August was also a dry month for initial public offerings (IPOs), Yue said, as companies postponed their fundraising plans amid uncertainties in the market and for fear of plunging valuations. Budweiser Brewing Company APAC and ESR Cayman together put off plans to raise as much as US$11.05 billion in Hong Kong.
Market sentiments improved in September, helped by the second cut in interest rates by the US Federal Reserve and HKMA, acting in lockstep, even though protests persisted on Hong Kong’s streets. Budweiser dusted off its listing plan with a US$5.8 billion offer, and ESR returned to raise US$1.6 billion this week, an even larger fundraising than its postponed plan.
Hong Kong’s M2, or banknotes and coins held by the public, including savings and time deposits, rose 0.6 per cent in September, after dipping 1.5 per cent in August.
M3, which is the broad money supply encompassing M2 and deposits with restricted licensed banks and deposit-taking companies, rose 0.3 per cent in September, after a 1.4 per cent drop in August.
