Strong Demand For HK Dollar 'linked To IPO Market'

The Hong Kong Monetary Authority (HKMA) has intervened the local currency market to prevent the Hong Kong dollar from breaching the strong end of the dollar peg, with some analysts saying the local IPO market is boosting demand for the currency.

HKMA bought US dollars in the market during US trading hours on Friday morning and released more than HK$970 million to keep the currency from trading beyond HK$7.75 cents to the greenback.

Analysts said the strong demand of the local currency may have to do with Netease's fund raising in Hong Kong.

The company is aiming to raise US$20 billion by listing in Hong Kong and the offering is said to be more than 300 times oversubscribed with more than 370,000 applications.

Tommy Ong, a Greater China expert at DBS Hong Kong said that it is indeed unusual for the Hong Kong dollar to stay close to the strong end of the band against the US dollar for a long time.

He said it may be that the new Covid-19 epidemic has stopped investments in riskier assets, and idle funds were diverted to the higher-yielding Hong Kong dollar.

Ong said he believes the Hong Kong market is still stable and as long as investors have not found other routes to enter the mainland market, there won’t be a large scale flow of funds out of Hong Kong.

According to data from the Monetary Authority of Singapore, deposits from outside the country has jumped 44% year-on-year in April to a record S$62.14 billion, the fourth consecutive month of increase.

A Reuters report quoted the Singapore Monetary Authority as saying that since the middle of last year, flow of foreign funds into Singapore from various areas such as Hong Kong have generally increased. (Additional reporting by Refinitiv)