Hong Kong intervenes for the third time in August to weaken local dollar as funds keep pouring in ahead of blockbuster IPOs

HKMA spent HK$114.41 billion intervening in the currency market 35 times in four months to bring the local dollar within its trading band

Excess liquidity helped to lower the cost of funds, with the one-month interbank offered rate falling to 0.2 per cent, from 2 per cent in March, giving a breather to businesses and mortgage borrowers struggling with the worst recession on record

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An employee counts US$100 banknotes at the Hang Seng Bank headquarters in Hong Kong, on Tuesday, April 16, 2019. Photo: Bloomberg

Published: 4:00pm, 25 Aug 2020Updated: 11:04pm, 25 Aug 2020

The Hong Kong Monetary Authority (HKMA) stepped into the market on Tuesday to weaken the local currency for the third time this month, as capital continues to flow into the city ahead of several blockbuster stock offerings by Nongfu Spring, Ant Group and other start-ups.

The city’s de facto central bank sold HK$643 million (US$83 million) of Hong Kong dollars to bring the currency’s exchange rate below the 7.7500 per US dollar, according to a statement. The Hong Kong dollar was recently trading at 7.7502 per dollar, shy of the top end of a trading band that requires the monetary authority to intervene.

The monetary authority spent HK$114.41 billion of Hong Kong’s reserves through 35 market actions in the past four months to dampen the effects of surging capital inflows, as a gap in interest rates with the rest of the world and a white-hot market for initial public offerings (IPOs) continued to suck in money. The influx of funds defy doomsday predictions of capital flight from Hong Kong, even as the city finds itself between escalating tension between Washington DC and Beijing.

“We have not seen any sign of capital leaving Hong Kong,” said Gordon Tsui, chairman of Hong Kong Stockbrokers Association. “In contrast, there is a lot of money rushing into Hong Kong, chasing after all the blockbuster IPOs like Ant.”

Ant, an affiliate of this newspaper’s owner Alibaba Group Holding, is pursuing a dual listing in Shanghai and Hong Kong, which could raise as much as US$30 billion from the two bourses, making it the largest stock sale in global financial history, stockbrokers said. Nongfu Spring, with the largest share of China’s bottled water market, is seeking to raise US$1.08 billion in Hong Kong.

Up to 64 companies have raised HK$92.8 billion in Hong Kong in the first six months, a 29 per cent increase in proceeds from the same period last year. That made Hong Kong the world’s second-largest destination for IPOs during the period, putting it in good position to reclaim the global crown for the eighth time in 12 years this year.