Cash dam reopened to flush out hot money
Monetary Authority steps in again to sell down local currency, bringing total injections in last two months to more than US$13.8b
The city's de facto central bank again sold down the Hong Kong dollar yesterday to maintain the currency peg to the US dollar as so-called hot money continued to pour in.
Analysts said the massive money inflow into Hong Kong was caused by the ultra-loose monetary policy in debt-laden United States and the European Union, where central banks have been buying government bonds and mortgage-backed securities to maintain ample money supply and keep borrowing costs low. Through this so-called quantitative easing, the Western governments hope to stimulate economic growth and cut unemployment.
"The trend of hot money inflow will not change in the short term, especially after the US government's stepping up of the quantitative easing programme," AMTD Financial Planning general manager Kenny Tang Sing-hing said. "Now that Japan has chosen a new prime minister, it is also widely expected to engage in similar operations to stimulate its moribund economy."
According to Reuters data, the equivalent of US$13.83 billion in Hong Kong dollars has been injected into the market since October 20. After the latest intervention, the sum of balances on clearing accounts maintained by banks with the HKMA will rise to HK$255.85 billion on December 27, indicating a continuing rise in the supply of Hong Kong dollars.
Analysts said the incoming funds were expected to be invested in assets seen as providing better returns than elsewhere in the world, especially Hong Kong and mainland shares, following Hong Kong's clampdown on property speculation.