Trump 'unlikely to undermine currency peg'

The chances of US President Donald Trump resurrecting an idea to undermine the Hong Kong dollar's peg to the greenback remain low, a senior HSBC (0005) executive says.

During Trump's first term as president, some of his top advisers suggested striking against the peg potentially by limiting the ability of Hong Kong banks to buy US dollars, as part of planned sanctions on China following the implementation of the national security law in the city in 2020.

The dollar peg - officially known as the Linked Exchange Rate System - affixes the Hong Kong dollar to the greenback at HK$7.80 per US dollar within a bandwidth of HK$7.75-HK$7.85.

Going beyond that would trigger HKMA intervention.

As a global financial hub, Hong Kong plays an important role in connectivity and the US will not act against the peg in the short term, said David Liao Yi-chien, HSBC's co-chief executive of Asia and Middle East at the opening ceremony of HSBC’s new office HyQ in Qianhai, Shenzhen.

Previous US sanctions on people and enterprises have not impacted Hong Kong, he said.

Liao also believes the mainland is resilient enough to withstand the 10 percent tariff that Trump is threatening to impose on imports from China.

The tariffs may also just be a bargaining chip Trump wants to use with China, he said.

But Liao warned that the new US president's policies may cause large market fluctuations and called for more trade and investment between mainland and Hong Kong markets.

He also said that China is no longer a mere production hub for the world but a high-tech hub that has helped stabilize inflation globally.

HyQ is the first office invested by HSBC in South China, involving a total investment of over 4 billion yuan (HK$4.28 billion).

CICI CAO