Money seems to be sticking around in SAR

Top News | Kevin Xu 29 May 2020

Neither the Hong Kong Monetary Authority or the Hong Kong Investment Funds Association saw capital flight from the city after the United States ceased to regard the SAR as autonomous from the mainland.

Arthur Yuen Kwok-hang, deputy chief executive of the HKMA, said yesterday there was no significant capital outflow from the banking system.

But the passing in the National People's Congress of a resolution to move on a security law for Hong Kong could cause rich mainlanders to park less funds in the city on worries mainland authorities could track and seize their wealth, according to a Reuters analysis.

The Bank of England had said previously that social unrest in Hong Kong led to US$5 billion (HK$39 billion) of capital moving from investment funds - equivalent to around 1.25 percent of Hong Kong's GDP.

Calculations and data from Refinitiv and EPFR Global were also cited in reaching that figure.

But Tim Lui Tim-leung, chairman of the Securities and Futures Commission, said the national security law could improve the investment environment and bolster investor confidence and protect their interests.

Lui, also a NPC deputy, said Hong Kong would not lose its advantages because of the security legislation.

And Bruno Lee Kam-wing, chairman of the Hong Kong Investment Funds Association, said what keeps international financial institutions operating in the SAR includes free capital flow, an open business environment and regulation and supervision of securities and banks.

As for the city's credit outlook, US policy on Hong Kong will not mean additional downgrading pressure for the SAR's credit rating, said Andrew Fennell, senior director of APAC sovereigns at Fitch Ratings.

Yet Fitch lowered Hong Kong's credit rating twice over the past nine months due to its rising economic and financial ties with the mainland, Fennell noted.

In April, the agency lowered Hong Kong's long-term foreign-currency issuer default rating to AA- from AA while raising its outlook for Hong Kong to "stable."

In the stock market, the Hang Seng Index shed 422 points at midday yesterday before paring losses.

It closed 168 points - or 0.72 percent - lower at 23,132 amid the escalating Sino-US tensions over Hong Kong.

Shares of property developers declined.

New World Development fell 1.61 percent to HK$7.95, Sun Hung Kai Properties 1.19 percent to HK$91.70, and CK Asset 1.76 percent to HK$41.75.

kevin.xu@singtaonewscorp.com

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