[The Epoch Times, July 22, 2022](Comprehensive report by Hong Kong Epoch Times reporter Li Xiaotong) The US Federal Reserve’s July meeting on interest rates is approaching, the Hong Kong exchange rate continued to be weak, and the Hong Kong dollar was sold. From May 12 to July 21, the Hong Kong Monetary Authority has entered the market 23 times to undertake Hong Kong dollar selling, with a total of 172.638 billion Hong Kong dollars. Some analysts pointed out that the Hong Kong dollar is facing three major risks.
Hong Kong dollar selling on the rise
Wang Jian, a senior financial media person, pointed out in his Youtube program “Wang Jian Daily Observation” that compared with the last US interest rate hike cycle, this time the US dollar interest rate hike, the HKMA undertook to sell the Hong Kong dollar, which greatly exceeded the 2016-2018 increase rate. size of the interest cycle. Selling of the Hong Kong dollar is increasing.
In the last round of US interest rate hike cycle, from 2016 to 2018, the Federal Reserve raised interest rates 9 times for a total of 2.25%, resulting in the Hong Kong exchange rate hitting the weak-side convertibility guarantee 35 times from 2018 to 2019. The HKMA has undertaken a total of 125.6 billion Hong Kong dollar. At that time, the aggregate balance of the banking system fell from nearly HK$180 billion to HK$54.2 billion.
After the Fed started the rate hike cycle this time, in the two months from May 12 to July 14, the HKMA has undertaken a total of HK$126.559 billion in selling orders, exceeding the scale of the previous U.S. dollar rate hike cycle. Moreover, within 24 hours from July 19th to 20th, the HKMA made three sell orders of nearly 23 billion Hong Kong dollars.
According to data from the HKMA on the 21st, as of July 22, the aggregate balance of Hong Kong’s banking system will fall to 165.259 billion yuan.
Market expects Hong Kong to follow the Fed to raise interest rates in September
The market generally believes that when the aggregate balance of the Hong Kong banking system falls below 100 billion yuan, the HKMA needs to follow the US Federal Reserve to raise interest rates, that is, to raise the prime rate (P).
Zhuo Liang, chief economist of CNCBI, pointed out at a press conference on the 18th that the Hong Kong dollar interest rate is expected to rise repeatedly. Although the HKMA has not followed the US Federal Reserve to adjust the interest rate, it is expected to have a greater chance of raising it in September.
Wang Jian analysis pointed out that the Federal Reserve still has the opportunity to raise interest rates at the end of July, and it is expected that Hong Kong has little chance of following interest rate hikes, because there is still room for the balance of HK$100 billion. But with the Fed raising interest rates again at the end of September, Hong Kong has a high chance of following the hike.
Hong Kong dollar selling increased, the balance of the banking system fell, and the outside world was concerned about the safety of the Hong Kong dollar. Wang Jian’s analysis pointed out that although the HKMA claims to have more than US$400 billion in foreign exchange reserves, Hong Kong still faces three major risks this time.
The first major risk is that at the beginning of July this year, the scale of the currency swap between China and Hong Kong was expanded to 940 billion Hong Kong dollars, that is, the CCP central bank can exchange 940 billion Hong Kong dollars from Hong Kong, which is equivalent to 120 billion US dollars of foreign exchange reserves.
He believes that the impact of this move on the market is mainly reflected in market confidence, because the CCP’s central bank has used Hong Kong’s foreign exchange reserves to reflect that there is a problem with the mainland’s foreign exchange reserves.
The second major risk is that the Federal Reserve will raise interest rates, triggering the outflow of funds from the Hong Kong dollar system; the third risk is that after the implementation of the “Hong Kong National Security Law”, the political atmosphere in Hong Kong has deteriorated, and more and more financial institutions have left Hong Kong and moved to Singapore. . While they took away business, they also took a lot of money. At the same time, Hong Kong people are leaving with funds under the tide of immigration.
Responsible editor: Lian Shuhua#