Hong Kong authority intervenes in market to check local currency's rise
HONG KONG :Hong Kong's de-facto central bank said it sold HK$46.54 billion ($6 billion) into the market on Saturday to prevent the local currency from strengthening beyond its official peg to the U.S. dollar, the first such intervention in more than four years.
The Hong Kong dollar is pegged to a tight band between 7.75 and 7.85 per U.S. dollar.
The Hong Kong Monetary Authority intervened as the Hong Kong dollar touched the strong side of that currency convertibility range. The last time it sold Hong Kong dollars to defend the peg was in October 2020.
"Seeing the HKD getting stronger means capital inflows, which is not problematic for Hong Kong," said Gary Ng, senior economist at Natixis.
The aggregate balance, the key gauge of cash in the banking system, will increase to HK$91.31 billion on May 7, an HKMA spokeswoman said on Saturday.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
4 hours ago
- Business Times
Hong Kong – Canary in a goldmine
THE perception of Hong Kong's decline as a financial hub and desirable place to live is both understandable yet overstated. During a recent business trip to Europe, one consistent reaction stood out: Clients' faces flashed with concern and sympathy when I mentioned I was based in Hong Kong. I get it. For years, the narrative around Hong Kong has been relentlessly downbeat: falling property prices; the 2019 protests; Covid lockdowns; expat departures; strained US-China relations; and renewed worries about the stability of the HKD-USD peg. The concerns are valid but, as I argue below, also misplaced. Which major equity market has outperformed most others in 2025? Which market ranks fourth globally by capitalisation, trailing only the United States, mainland China, and Japan? Which market raised more in IPOs than Europe's exchanges combined this year? And which economy welcomed more tourists than Japan from January to May 2025? If you answered Hong Kong to all, you're absolutely correct. Surprised? Let me explain. Golden goose My optimism about Hong Kong's future hinges on its currency: the Hong Kong dollar (HKD). Within the Greater China region, no other city matches its currency's liquidity and convertibility (with apologies to Macau's pataca). Corporate China's unquenchable demand to recycle hard currency is well known, and until the renminbi becomes convertible – likely a distant prospect – Hong Kong's role as China's premier funding conduit remains secure. But what about the HKD-USD peg's vulnerabilities? Recent media reports have highlighted pressures on the peg, and these concerns are reasonable. Yet, the strain isn't from capital flight; it's the opposite. Inflows from IPOs, dividends, and investment opportunities are so robust that the Hong Kong Monetary Authority (HKMA) had to sell some HK$47 billion (S$7.6 billion) in May 2025 to temper HKD appreciation. Of course, an appreciating currency is a nice problem to have, as are interest rates at – or close to – record lows. But, either way, both are still problems if allowed to endure, potentially distorting the allocation of capital. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up To be fair, the allure of a USD carry trade (selling HKD and investing in US money market funds for example) has seen the HKD's value normalise. But even two weeks on from the last mega-IPO, the monetary system remains awash with liquidity, allowing banks to reset mortgages rate lower and allowing refinancing opportunities for the beleaguered commercial real estate sector. Local hero With roughly comparable populations, land mass, and economic size, the friendly competition between Hong Kong and Singapore as rival business centres is as storied as it is long-running. Anyone who has recently visited Singapore will have been mightily impressed by the energy, opportunity, and confidence that the city state currently exudes; and might conclude – reasonably – that Hong Kong has (temporarily) lost its mojo to its ascendent challenger. Yet, Hong Kong's role as China's financial gateway also gives it both a role and an edge, certainly in the ability to offer local companies liquidity for financing purposes. For example, Hong Kong's stock market has a total market capitalisation of US$6.3 trillion, entirely dwarfing Singapore's at merely US$0.5 trillion, a 13-fold difference. As China corporates consider delisting from the US or dual list in Hong Kong, one can assume Hong Kong's market capitalisation may likely increase. Admittedly something of a stealth rally, the Hang Seng Index (HSI)'s year-to-date performance – largely complementing and reflecting renewed interest in China – may also have attracted international investors. At time of writing, the HSI was up 21 per cent on the year, outperforming the majority of competitor markets. My sense is as investors rotate thematically from US exceptionalism to – among other things – (China-centric) emerging market opportunities, local equities may further benefit in the months and quarters to come. Canary's fragility Yet for all Hong Kong's recent positives, as a financial entrepot it is both sensitive and vulnerable to the volatilities of global trade. And that is unlikely to change anytime soon. Thus, strained trade relations between the US and China – and the risk of high tariffs being imposed by the former on the latter – will negatively impact the city's fortunes. Inevitably, Hong Kong reliance on mainland inflows – with some 80 per cent of Hong Kong Exchanges and Clearing's market cap tied to Chinese firms – exposes it to China's economic slowdown risks. Escalating geopolitical tensions or a faltering Chinese economy could trigger occasional liquidity shocks, potentially derailing Hong Kong's markets for a while. At Lombard Odier, we are overweight equities, including those in emerging markets. Our preferred way to access China risk is via Hong Kong's H Share market. Thus far, it has been a satisfactory trade. But Hong Kong's East-West history positions it – somewhat uniquely – in the crosshairs of tensions between the world's two great superpowers. Hong Kong's resilience is well known and well regarded; but shouldn't be taken for granted. The writer is chief investment officer, Asia, at Lombard Odier
Business Times
12 hours ago
- Business Times
Alibaba movie unit's pivot, rebrand bring US$2 billion value gain
DAMAI Entertainment Holdings, formerly Alibaba Pictures Group, is shifting its focus from movies production to faster-growing entertainment segments targeting younger consumers – and investors are taking notice. Since its May 19 earnings report, which highlighted a pivot towards intellectual property (IP) licensing and live events, the company's shares have roughly doubled, making it the top performer on Hong Kong's Hang Seng Composite Index and adding US$2 billion in market valuation. Several analysts have since upgraded their outlooks. The rebrand to Damai Entertainment, effective this month, reflects this broader focus. While its core film production business shrank, Damai still posted double-digit growth in both sales and profit for the fiscal year ended Mar 31 – driven by its IP merchandising and live entertainment arms. The Damai name, originally tied to its concert and event unit, now represents the company's alignment with China's 'new consumption' trend. Young consumers are increasingly drawn to tech-driven, emotionally engaging experiences, and Beijing is encouraging more spending to boost the economy. The name change and strategic shift are a 'turning point', signalling Damai's ambition to become a more well-rounded offline entertainment provider, Citigroup analysts said in a note. The stock has already surpassed Citi's HKD$0.92 target and China International Capital's revised HKD$0.98 target. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Still, Damai remains a penny stock with notable risks. Its film and TV segment shrank 9.6 per cent last year, and content investment remains volatile. Citi maintains a 'Buy/High Risk' rating, citing margin uncertainties. Its valuation has also become high, according to Shen Meng, a director at Beijing-based Chanson & Co. 'Short-term stock price fluctuations increase valuation risks,' he said. The stock is trading at nearly 29 times its forward earnings estimates, far above a ratio of around 10 for the Hang Seng Index, data compiled by Bloomberg showed. But he believes the pivot towards younger consumers is smart: 'Young people have a longer consumption cycle.' Pokemon and Sanrio The move is already playing out. Gen Z's spending on hobby goods and celebrity merch has fuelled stock surges for companies such as Pop Mart International Group and Bloks Group – and now Damai. The IP merchandising unit, including the sub-licensing business AliFish, partners with brands such as Pokemon, Sanrio, and Chiikawa, and sub-licenses them to merchants. The unit's revenue grew 73 per cent last year. The Citigroup analysts call AliFish 'the nation's largest IP licensing agent' and the 'young people's underlying supplier for IP merchandising'. Meanwhile, Damai's live entertainment business – concerts, festivals, exhibitions – saw a 236 per cent revenue jump. It also runs a major ticketing platform and expects more growth from international concert sales. 'Entertainment in China has strong, diverse demand,' Shen said. 'If one has liked something since childhood, they will basically always like it.' BLOOMBERG
Business Times
5 days ago
- Business Times
Hong Kong to maintain US dollar peg despite geopolitical tensions
[SHANGHAI] Hong Kong will maintain its currency peg to the US dollar, the financial hub's leader said in an interview published on Monday (Jun 9), despite escalating geopolitical tensions and some calls to shift to a Chinese yuan peg. The Hong Kong dollar has experienced sharp volatility over the past two months, strengthening to hit the strong end of the trading band and prompting the city's de-facto central bank to forcefully step up intervention, before the currency softened to near the weaker limit in recent sessions. 'Hong Kong's link with the US dollar has proven to be one of the fundamental success factors,' John Lee told the South China Morning Post, noting that the peg had always come under pressure, especially in uncertain times. In order to defend the currency's peg to move within the 7.75 and 7.85 per US dollar range, the Hong Kong Monetary Authority injected HK$129.4 billion (S$21.2 billion) into the market to purchase US$16.7 billion worth of US dollars in multiple interventions last month. Some market watchers have called for switching Hong Kong's US dollar peg to the yuan at a time when trade tensions between the world's two largest economies have created uncertainty. Lee said his administration would strengthen the city's role as the global offshore yuan hub, while continuing to defend the US dollar peg. 'We will do more (offshore yuan) product diversification, so that it will generate more trade,' he told the newspaper, noting that about 80 per cent of the offshore yuan payments were processed in Hong Kong. REUTERS
