“We will see strong capital inflow into Hong Kong in the coming years,” said Raymond Chan, chief investment officer of Asia-Pacific equity at the German fund management company Allianz Global Investors. “Zero interest rates and more QE [quantitative easing] in the US will see money flowing into riskier asset classes over time as the hunt remains for yield and returns.”

“When there [is] capital inflow, the exchange rate will move to the strong end of the peg. If that happens, the HKMA will sell the Hong Kong dollar and buy the US dollar to weaken the local currency” to keep it within the trading band of 7.75 to 7.85 per US dollar, Yue said in a media briefing on Monday.

The spectre of 2008 may not recur because Hong Kong’s financial environment and asset prices are different from 12 years ago, some analysts and strategists said.

“It will not happen again,” said DBS Bank’s managing director of Greater China wealth management solutions, treasury and markets Tommy Ong, adding that stocks and property are now more expensive than they were in 2008. “We are not going to see the same massive amount of hot money flow in Hong Kong this time.”

Unlike in 2008, Asia’s largest capital market in mainland China is now open for foreign funds – albeit in limited amounts – via several cross-border investment channels that link the Shanghai and Shenzhen stock markets with Hong Kong and London. Bonds are also tradeable via the so-called Bond Connect scheme, letting global investors tap Chinese government debt via Hong Kong.

That reduces the demand for Hong Kong-listed equities by offering more investible options for global capital, unlike in 2008, when Hong Kong stocks were sought after as proxies for China’s economic growth, said Ong. To underscore the point, Hong Kong’s Hang Seng Index rallied 52 per cent in 2009, surging from the 48-per cent slump a year earlier that saw the benchmark falling to 13,425 at the end of 2008.

“International investors can invest more in China’s market directly,” bypassing Hong Kong, Ong said.

The HKMA can be a formidable opponent as shown by the trail of failed speculative attacks by hedge funds on Hong Kong's pegged currency system, one of the last in the world.

Funds mounted one of their most serious challenges to the peg during the 1997-1998 Asian financial crisis. They met with a spirited defence.

The HKMA went on the defensive most recently last year. The authority’s data showed it intervened 35 times and spent HK$125.61 billion to defend the local currency over the 12 months ending in March 2019.

Another buffer that may deter the inflow of hot money is Hong Kong’s property prices, which are still hovering near record levels for luxury flats, retail shops and office buildings, even after more than a year of the US-China trade war and many months of anti-government protests.

The average price of lived-in residential property in Wan Chai on Hong Kong Island – the closest walkable residential suburb near Central – was HK$24,642 per square foot in March, more than double the HK$9,646 per square foot in December 2008. That still makes Hong Kong the world’s most expensive major urban centre to live, work or do business in, by most comparative studies.

“Back then [in 2008,] the property price dropped 12 per cent in a year. We had international and mainland Chinese buyers who wanted to buy all types of properties from 2009 onwards,” Po said.

Hong Kong’s stock market is not attractive enough for investors, according to Eleanor Wan, chief executive of BEA Union Investment.

“Instead of switching to Hong Kong, investors may prefer to hold cash and stay on the sidelines rather than invest in such a turbulent market,” she said.

And hot money may eventually make its way into mainland China, as the People’s Bank of China shows no signs of relenting on its monetary policy, or following global central banks in their latest round of competitive rate cuts. That places China’s prime rate, at 4.05 per cent as of February, among the highest out of 11 economic regions, which would attract more global funds in search of higher returns.

“International investors could be reducing their noncore positions globally (emerging markets in particular) as they brace for extreme volatility and sell-offs in their home markets,” said Jason Lui, head of equity and derivative strategy APAC of BNP Paribas in a research note on Wednesday.

Hong Kong was also hard hit by the many months of anti-government protests since June last year, which has led to some capital outflow. This year, because of the spreading coronavirus and slowing economic growth some US$6.7 billion has flowed out of Asia excluding Japan equities, according to EPFR and Goldman Sachs analysis.

Claude Haberer, chairman of Pictet Wealth Management Asia said Hong Kong remains an attractive market even after the social unrest. “The fundamentals of Hong Kong’s attractiveness to investors have not changed: free movement of people, capital and information and the rule of law,” Haberer said.

As investors search for a place to park their cash when volatility abates they may once more eye Hong Kong assets.

“We’ll likely see a return of hot money inflow into Hong Kong to invest in the stock market later this year when the pandemic is under control,” said Tom Chan Pak-lam, chairman of Hong Kong's Institute of Securities Dealers, an association of stockbrokers.

Additional reporting by Alison Tudor-Ackroyd