Banking holds firm in face of contraction

Business | Tereza Cai 9 Oct 2019

The University of Hong Kong and an analyst from DBS Bank Hong Kong both say Hong Kong will face an economic contraction in the rest of the year while the banking industry will run normally.

The university lowered the city's growth forecast this year for the third time to zero and predicted a 0.9 percent contraction for the fourth quarter.

Samuel Tse Ka-hei, an economist of DBS Bank Hong Kong, said the second-half economy is likely to see a 0.6 percent contraction if uncertainties such as the Sino-US trade war cannot be eliminated.

Credit rating agency Standard & Poor's maintained Hong Kong's long-term score as AA+, as the SAR government's credit situation can bear the impact of social unrest in the next two to three years. But it stresses the impact on developers will be bigger.

Meanwhile, the Hong Kong Monetary Authority said it is always asking banks to manage liquidity risks in a prudent manner and is paying attention to the possible impact of recent social events and the external environment on local bank liquidity.

Its comments came after local media reported that the authority has asked banks to immediately report any unusual conditions that could lead to a sudden change in the overall market capital arrangement, be they in cash withdrawals in branches or automated teller machines, or money transfers of clients.

The authority also revealed that official foreign currency reserve assets of Hong Kong amounted to US$438.7 billion (HK$3.42 trillion) at the end of September, up by US$5.9 billion from a month before.

Meanwhile, the Hong Kong Federation of Insurers said the enactment of the Emergency Regulations Ordinance will not affect the validity of insurance policies.

Insurance policy is a commercial contract and both the insured and insurers are bound by the terms and conditions, it said.

This came following rumors that the emergency regulations could invalidate insurance policies in Hong Kong.

In other news, the Hong Kong Association of Banks said operations of the banking industry weer largely normal yesterday and banks had ample cash to refill ATMs.

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