Chinese Mandarin - 5 billion HKD of hot money left Hong Kong

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5 billion HKD of hot money left Hong Kong

www.chinanews.cn 2005-02-04 14:16:28

Chinanews, Feb 3 - Five billion HK dollars of hot money promptly withdrew
from Hong Kong in the last two days. Currently, the speculative trend of
betting international idle funds on an RMB appreciation seems to have
cooled, and instead, hot money is chasing the US Federal Reserve which
was expected to announce another rate hike last night, after a succession
of previous rate increases.
The Hong Kong Monetary Authority (HKMA) announced yesterday that it
purchased 1.131 billion Hong Kong dollars against US dollars on Tuesday,
the second time it intervened in the foreign exchange market this week.
Including buying 3.822 billion HK dollars on Monday, the HKMA has
purchased a total of 4.953 billion HK dollars this week. Some experts
asserted that this was an indication that nearly five billion HK dollars
of hot money had left Hong Kong in a hurry.
A pile of international hot money has rushed into Hong Kong to gamble on
an RMB appreciation since last September, causing the balances of all
Hong Kong banks to soar to more than 15 billion HK dollars from just 3
billion. The HKMA's corresponding policy was to purchase US dollars by
selling its own currency from last September till this week. Bank
balances thus became the barometer of the amount of funds flowing in and
out of the Hong Kong Special Administrative Region.
The balances of Hong Kong's banking system consistently remained at the
high level of 15.8 billion between last December and last month. However,
this week's two large outflow of funds brought it down to 10.848 billion,
a one-third decline, and also the first decline in five months.
Some experts attributed the outflow of hot money to speculation that the
Fed would raise rates by a quarter point, which would further widen the
interest rate spread between US and Hong Kong dollars. In order to profit
from this rate spread, it was inevitable that funds would leave Hong Kong
and bid on US dollar-denominated assets.
Besides the Fed's anticipated rate hike, a more profound cause of the
outflow of hot money lies in the speculators' disappointment at their
failed RMB appreciation theory.

E-mail: zhangqinghua@chinanews.com.cn Tel: 8610-88387443 Fax:
8610-68327649

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