Hong Kong dollar's continued strength hinges on capital inflows and mega IPOs, says HKMA

Hong Kong’s de-facto central bank said the Hong Kong dollar’s continued strength and the need for further market intervention will hinge on the pace of southbound capital inflows, as well as the impact of upcoming mega initial public offerings.

This came as the Hong Kong Monetary Authority intervened in the currency market for the third time since Saturday to stop the local currency from further strengthening and breaking its peg to the US dollar. The HKMA purchased HK$60.5 billion against the Hong Kong dollar on Tuesday after the local currency repeatedly touched the upper limit of its 7.75–7.85 trading band versus the US dollar. 

HKMA chief executive Eddie Yue Wai-man noted that carry trade activity has slowed as investors and investment banks turn more risk-averse, adding that sustained inflows could lead to a drop in local interest rates.

Total injections since the weekend reached HK$116.6 billion, with the banking system’s aggregate balance set to rise to HK$161.4 billion by Wednesday.

Separately, Chinese battery maker Contemporary Amperex Technology, or CATL, has passed its Hong Kong listing hearing and is aiming to raise at least US$5 billion (HK$39 billion) as soon as this month.

STAFF REPORTER