Hong Kong investors should manage investment risks prudently and exercise extreme caution, Financial Secretary Paul Chan Mo-po said on Tuesday.
“The equity, derivatives and foreign exchange markets in Hong Kong, as well as the city’s banking system, are all operating normally, and banking operations are robust enough to cope with economic cycle changes,” he said ahead of a weekly meeting of the Executive Council.
There’s no usual market concentration risk or manipulation risk at the moment. Amid market volatility, the government will monitor market developments closely and introduce further measures to safeguard the running of financial markets when appropriate
Paul Chan Mo-po, financial secretary
The Hong Kong Monetary Authority will maintain normal operations of the money and foreign exchange market and ensure the stability of the Hong Kong dollar, said Chan.
The Hang Seng Index plunged about 1,100 points, or 4.23 percent, on Monday in line with the global market crash as oil prices tumbled following the collapse of negotiations between major oil producers, led by Saudi Arabia and Russia, on production cuts.
“There’s no usual market concentration risk or manipulation risk at the moment. Amid market volatility, the government will monitor market developments closely and introduce further measures to safeguard the running of financial markets when appropriate,” Chan added.
On a whole-day basis, the aggregate turnover in active short-selling of securities reached HK$29.7 billion (US$3.8 billion) on Monday, accounting for 17.5 percent of overall market turnover — higher than the up-to-date average level.
The Securities and Futures Commission has been closely watching transactions to protect investors from unusual deals or market rigging. Given a correction of a large magnitude, Hong Kong Exchange and Clearing collected HK$5.9 billion in deposits from settlement participants, who managed to pay on time.
Economists agreed that the Hong Kong dollar will remain stable.
“Should the US Federal Reserve cut rates again at its meeting in March, the HIBOR (Hong Kong Interbank Offered Rate) may follow LIBOR (London Interbank Offered Rate) to move another leg lower. Having said that, the drop in HIBOR could be milder than that of its US dollar counterpart, given the small size of the aggregate balance and the still fierce competition for deposits across the banking system. Thanks to the yield differential, the USD/HKD spot is expected to oscillate in the stronger band of the currency peg in the near term,” said OCBC Wing Hang Bank economist Carie Li.
The monetary base, as a gauge of capital inflow or outflow of Hong Kong’s financial system, reached HK$1.68 trillion at the end of January — up 1.6 percent from the end of December. The monetary base comprises certificates of deposits, government-issued currency in circulation, the aggregate balance and outstanding Exchange Fund bills and notes. The aggregate balance had recently slipped to a low level of HK$54.2 billion.
