Hong Kong steps in to weaken the local dollar, as hot money inflows defy doomsday talk of capital flight after China’s security law
- Hong Kong’s monetary authority sold HK$15.31 billion of local dollars on Monday and Tuesday to weaken the currency and bring it back within its trading band
- Hong Kong’s de facto central bank had to intervene 24 times this year, spending up to HK$72.94 billion to maintain the dollar’s trading band
Hong Kong’s monetary authority stepped into the financial markets to weaken the local currency on Tuesday, the 24th time this year it has had to rein in the effects of hot money and its first intervention since last week’s enactment of China’s national security law.
“The IPO market remains piping hot, which continues to suck in hot money” in search of higher returns, forcing the HKMA to continue its interventions, said Bruce Yam, currency strategist at Everbright Sun Hung Kai Company Limited in Hong Kong. “Some of the wealthy people in town are also moving their assets away from the US”, in reaction to the rising tension between the US and China over Hong Kong, he said.
The lower Hibor, which is linked to mortgage loans and most of the city’s corporate borrowings, would provide relief to households and businesses, giving them a helping hand to recover from Hong Kong’s worst recession on record. Hong Kong’s economy contracted 8.9 per cent in the first quarter, its worst slump since 1974.
These include the US$1.8 billion being sought by China Bohai Bank, and several biotechnology and health care-related Chinese issuers. Cancer therapy developer Immunotech Biopharm launched its IPO last week to raise up to US$141 million, while ophthalmic therapy provider OcuMension Therapeutics is seeking to raise up to US$199 million. Both companies are slated to list on the main board this Friday.
Others that could potentially complete their IPO and listing this month include JHBP (CY) Holdings, an oncology and autoimmune drug maker backed by Hillhouse Capital and is reportedly raising US$300 million. Mobile game developer Archosaur Games plans to raise up to US$278.7 million.
Hong Kong benchmark Hang Seng Index rose almost 1,000 points on Monday with a turnover at HK$251.29 billion, the most in two years.
“The sentiment is extremely strong as the mainland market rallied to the highest in recent years,” said Tom Chan Pak-lam, chairman of Hong Kong Institute of Securities Dealers. “It is not going to cool down any time soon, and we are going to see more money flowing in to bet on the stock market.”