Hong Kong five-hundred and one-hundred dollar banknotes are arranged for a photograph in Hong Kong, China, on April 23, 2020. (PHOTO / BLOOMBERG)

A mega share sale by Ant Group is likely to boost demand for the Hong Kong dollar, pinning the currency at the strongest it is allowed to trade and prompting government intervention.

The Hong Kong dollar has repeatedly touched 7.75 versus the greenback this week, the strongest it can technically trade

The Hong Kong dollar has repeatedly touched 7.75 versus the greenback this week, the strongest it can technically trade. That has prompted the Hong Kong Monetary Authority to sell the local currency for the first time in three weeks to defend its foreign-exchange peg to the US dollar.

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The strength comes as billionaire Jack Ma’s fintech giant Ant filed for a dual listing in Hong Kong Special Administrative Region and Shanghai on Tuesday that could raise a total of US$30 billion and exceed Saudi Aramco’s record initial public offering. Large listings like this often drive up demand for funding because investors need to set aside cash to buy the stocks.

“We expect the Hong Kong dollar to re-test 7.75 in the near future,” said Carie Li, an economist at OCBC Wing Hang Bank. “More IPOs and secondary listing of firms listed in the US will boost the demand for the Hong Kong dollar. Meanwhile, the upbeat investment sentiment and flush global liquidity may lead to equity inflows.”

The Hong Kong dollar has been hovering near the strong end of its trading band since April, shrugging off the death of a long carry trade and escalating tensions between the US and the Chinese mainland. The strength has prompted the authorities to sell the equivalent of US$14.8 billion of the local currency to weaken it. The maneuvers have expanded the interbank liquidity pool to the largest since 2017, sending the one-month interest rate on the currency to a four-year low.

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Previous mega listings have also caused dramatic spikes in the interbank borrowing costs, known as Hibor. In 2018, the one-month tenor on the rate soared to the highest level in a decade ahead of Xiaomi Corp’s US$4.7 billion IPO. Funding costs also spiked last year in the months before an US$$11 billion share sale by Alibaba Group Holding Ltd.

The Hong Kong dollar traded close to 7.75 at 4:15 pm local time. The one-month Hibor was steady at 0.26089 percent Thursday. The rate affects the cost of everything from mortgages to corporate loans.

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