HKMA injects HK$15.5 billion into the market
Hong Kong’s central bank on Monday afternoon injected an additional HK$7.753 billion into the territory’s interbank market, its second injection of the day, as a plunging stock market pushed up interbank rates.
The move took the total fund injection for the day to HK$15.5 billion as the central bank sought to ease liquidity.
The three month Hong Kong interbank offered rate (Hibor) was fixed 45 basis points higher on Monday, its biggest one-day gain since US investment bank Lehman Brothers went bankrupt in September.
Traders said a 12.7 per cent plunge in the Hong Kong stock market – its biggest one-day loss since 1997 – helped pushed up interbank rates as international investors desperate for cash sold shares in Hong Kong, one of the world’s most liquid markets.
“Taking into account strong precautionary demand for liquidity in the market, the HKMA operated within the convertibility zone, purchasing US dollars against Hong Kong dollars,” a spokesman for the Hong Kong Monetary Authority said.
The convertibility zone refers to the Hong Kong dollar’s pegged trading band at 7.75 to 7.85 to the US dollar.
The Hong Kong currency was quoted as high as 7.7505 on Monday before the first fund injection in late morning. It then fell back to around 7.7516 and was still trading around that level in late trade after the second fund injection.
Monday’s fund injection was the biggest since the HKMA began injecting liquidity into the market in mid-September as the global credit crisis worsened and banks became increasingly reluctant to lend.
HKMA chief Joseph Yam Chi-kwong on Monday urged local banks to support companies instead of tightening lending.
The one-month Hong Kong interbank offered rate (Hibor) was quoted at 3.70-3.80 per cent late on Monday, above its late morning fixing at 3.49786 per cent despite the two fund injections.
A growing number of economists say Hong Kong is heading for a recession but analysts said the stock market sell-off was more a reflection of overseas investors’ demands for cash.
“The stock market was following other Asian markets. It is being driven by institutional investor behaviour in the United States,” said Paul Tang, senior economist at Bank of East Asia (SEHK: 0023).
“They need funds in a hurry and they are targeting the most liquid markets to get the money. Unemployment in Hong Kong is still at 3.4 per cent, so the market [plunge] is not reflecting fundamentals here.”
(SCMP)
The move took the total fund injection for the day to HK$15.5 billion as the central bank sought to ease liquidity.
The three month Hong Kong interbank offered rate (Hibor) was fixed 45 basis points higher on Monday, its biggest one-day gain since US investment bank Lehman Brothers went bankrupt in September.
Traders said a 12.7 per cent plunge in the Hong Kong stock market – its biggest one-day loss since 1997 – helped pushed up interbank rates as international investors desperate for cash sold shares in Hong Kong, one of the world’s most liquid markets.
“Taking into account strong precautionary demand for liquidity in the market, the HKMA operated within the convertibility zone, purchasing US dollars against Hong Kong dollars,” a spokesman for the Hong Kong Monetary Authority said.
The convertibility zone refers to the Hong Kong dollar’s pegged trading band at 7.75 to 7.85 to the US dollar.
The Hong Kong currency was quoted as high as 7.7505 on Monday before the first fund injection in late morning. It then fell back to around 7.7516 and was still trading around that level in late trade after the second fund injection.
Monday’s fund injection was the biggest since the HKMA began injecting liquidity into the market in mid-September as the global credit crisis worsened and banks became increasingly reluctant to lend.
HKMA chief Joseph Yam Chi-kwong on Monday urged local banks to support companies instead of tightening lending.
The one-month Hong Kong interbank offered rate (Hibor) was quoted at 3.70-3.80 per cent late on Monday, above its late morning fixing at 3.49786 per cent despite the two fund injections.
A growing number of economists say Hong Kong is heading for a recession but analysts said the stock market sell-off was more a reflection of overseas investors’ demands for cash.
“The stock market was following other Asian markets. It is being driven by institutional investor behaviour in the United States,” said Paul Tang, senior economist at Bank of East Asia (SEHK: 0023).
“They need funds in a hurry and they are targeting the most liquid markets to get the money. Unemployment in Hong Kong is still at 3.4 per cent, so the market [plunge] is not reflecting fundamentals here.”
(SCMP)
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