Low Inoculation Rate Threatens HK's Hub Status: HKMA

The Monetary Authority's chief executive, Eddie Yue, warned on Monday that Hong Kong's low Covid vaccination rate could threaten the city's status as a financial hub.

Eddie Yue said more than 50 percent of people in the US have now had at least one dose of vaccine, while in the UK the figure is above 40 percent. It's around 25 percent in Singapore.

But in Hong Kong, only around 14.5 percent of people have so far received at least one jab.

"I am concerned...we are lagging behind in a sense," Yue said.

He noted that central bankers now believe vaccination rates, rather than epidemic controls, are key to a full economic recovery.

Yue warned that Hong Kong could be left out of future travel bubbles between international financial centres if its vaccination rate does not catch up.

"If you were a regional executive sitting in Hong Kong running the regional business in Hong Kong, without being able to fly around in Asia or fly back to your headquarters for reporting, will you think I should remain in Hong Kong, or should I move to another centre?" Yue said.

"And that will affect the competitiveness of us being a regional or international financial centre."

Yue made the remarks after Monetary Authority officials reported to Legco that the Exchange Fund made an investment income of HK$11.6 billion in the first quarter.

That's down 90 percent on the previous quarter, but compares to a HK$112 billion loss in the same period last year.

The preliminary figure excluded income from the "other investments" category.

Investment in foreign equities contributed the most, bringing a return of nearly HK$18.8 billion, helping to offset a loss of HK$16 billion in bonds.

Yue said the performance of the massive fund, which is used to defend the city's currency, will largely hinge on US inflation risks and how the market interprets them.

He said the market has been worried that inflation in the US will force the Federal Reserve to taper its accomodative monetary policies.

"If that happens there is a risk that the very elevated asset prices that we're now seeing in the market might have a bigger correction... there is also a risk that the flows that came into the emerging markets including Asia and Hong Kong will be reversed," he added.

The Monetary Authority also revised the fund’s full year result for 2020 to a return of HK$236 billion, up from its preliminary figure of HK$197.8 billion from January.

Meanwhile, Yue told lawmakers during his briefing that the property market has heated up "a bit" in terms of prices and transactions.

But he said the property market cycle remains stable and the authority does not see a need to adjust its cooling measures.