No concern over fund flows, HKMA assures

Business | 23 Aug 2019 6:14 pm

Bank deposits increased to HK$13.6 trillion at end June, which was HK$200 billion higher than the figure at the end of 2018, said Howard Lee, deputy chief executive of Hong Kong Monetary Authority in an article on the HKMA website, as he discussed some topics on the Hong Kong dollar fund flows.

Deposits are one of the aspects to evaluate the Hong Kong dollar fund flows, he said, adding another important factor to note is that the weak-side convertibility undertaking has not been triggered since March, and the HKMA has not bought Hong Kong dollars and sold US dollars under this mechanism.

"As we pointed out in several articles in the past two years, any fund outflow from the Hong Kong dollar market upon triggering of the weak-side convertibility undertaking is a natural normalization process given the massive inflows in the past. The HKMA is fully capable of handling this and there is no cause for concern," he wrote.

As for Hong Kong dollar interbank rates, he said the reduction of the aggregate balance of the banking sector from over HK$200 billion a couple of years ago to the current level of HK$54 billion has made the HK dollar interbank rates more sensitive to changes in supply and demand of HK dollar funding.

"I want to point out that interbank rates are affected by many variables, and it is impossible to predict or quantify the impact of individual factors," Lee said, stressing that continuous market surveillance is crucial to the maintenance of monetary stability, "which is one of the key functions of the HKMA that we always do, rain or shine."

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