Speculators who bet against HK dollar will lose: city financial chief
Published: Nov 03, 2022 07:33 PM
Hong Kong Source: VCG

Hong Kong Source: VCG

Hong Kong Special Administrative Region's Financial Secretary Paul Chan Mo-po delivered a message to the market on Thursday, saying that the city authorities are capable of keeping the Hong Kong dollar stable, which experts read as a warning to speculators that their attempts to short the local currency won't succeed.

Hong Kong has established a powerful buffer zone and banking system to support the operation of the Hong Kong dollar's exchange rate system, and the investors who bet against the currency will fail, he said at a seminar of the three-day Global Financial Leaders' Investment Summit, which opened on Wednesday in Hong Kong, reported on Thursday.

He reemphasized that the Hong Kong dollar is pegged against the US dollar within a range of 7.75-7.85. The Hong Kong Monetary Authority (HKMA) will intervene to let the market find the "balance" if the Hong Kong dollar veers off the accepted range.

Xi Junyang, a professor at Shanghai University of Finance and Economics, said Paul Chan Mo-po's words could be regarded as a declaration to market speculators who try to short the Hong Kong dollar.

"It is a message to squelch currency speculation," he told the Global Times on Thursday.

The Hong Kong dollar's peg to the greenback is said to be under mounting pressure as the US raises interest rates under the Federal Reserve's hawkish monetary policy. According to a report by Nikkei Asia, many investors are converting funds raised in Hong Kong dollars to the greenback for a profit as the US central bank has kept raising rates in the past months. 

"The situation of speculators shorting the Hong Kong dollar has been obvious recently, with some betting that the Hong Kong dollar will slump and the peg will break," Xi said. 

The Hong Kong dollar has remained near a floor of 7.85 for months, while the HKMA intervened to buy it 36 times between May 12 and October 13, in order to support the currency, according to media reports.

The Hong Kong dollar stood at 7.8496 against the US dollar as of press time. 

Paul Chan Mo-po used specific data to show that Hong Kong officials are capable of keeping the linked exchange rate system intact. Hong Kong's foreign reserves stand at $430 billion, equivalent to about 1.7 times the monetary base of the Hong Kong dollar.

He also said that Hong Kong has established a system to monitor risks across its markets, and it pays attention on a daily basis to factors that move the market, such as the scale of short selling, concentration risks and the derivatives market. So far, no alarm signal has been detected. 

Xi noted that Hong Kong has sufficient foreign reserves to keep the Hong Kong dollar stable, and in extreme cases, the Chinese mainland will lend support to Hong Kong with its foreign reserves.

"There's no doubt that the Hong Kong dollar will maintain its stability," he said.