US Autonomy Act unlikely to undermine Hong Kong dollar peg in short-run, but poses long-term risk, analysts say
- US sanctions on Hong Kong banks are seen as the biggest risk to the finance hub, although one-year time frame before imposition and ability to appeal eases concerns
- But analysts say the long-term outlook for the Hong Kong dollar peg is uncertain given escalating tensions between China and the US
US President Donald Trump’s decision to take action against Beijing over its imposition of a new security law on Hong Kong is unlikely to undermine the city’s dollar peg system or its role as a financial hub in the short term, but escalating conflict between the US and China raises questions about the long-term outlook, according to analysts.
The US State Department has 90 days to designate individuals or entities in contravention of the law, after which banks will have one year to cease business relations.
Only a few banks are expected to be targeted, and they would be allowed to appeal for removal from the US government’s sanctions list, analysts said. This has eased worries over a full-blown US-China financial war, as well as other extreme scenarios in the short-run, said Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis.
Since the president has given leeway for a lot of time to identify these banks and to impose the actual sanctions, there isn’t a real market impact and there aren’t excessive concerns for the time being
Carie Li Ruofan, an economist at OCBC Wing Hang Bank, said the biggest worry had been the threat of financial sanctions on banks.