Hong Kong denies 640 billion HKD inflow of hot money

16:59, November 30, 2010      

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Many media groups had previously reported that hot money flowing into Hong Kong has reached up to 640 billion Hong Kong dollars. Norman Chan, president of the Hong Kong Monetary Authority (HKMA), explained on Nov. 29 that the 640 billion Hong Kong dollars flowing into Hong Kong is not hot money but offshore funds recalled by enterprises and collected money from a large number of new listed shares.

Chan pointed out that the 640 billion Hong Kong dollars is the total amount of funds flowing into Hong Kong in the fourth quarter of 2008 and 2009, of which 220 billion Hong Kong dollars are offshore deposit funds recalled by banks and enterprises to cope with the credit squeeze in the fourth quarter of 2008 and the first quarter of 2009.

In addition, the collected money from IPOs in the first 10 months of 2010 reached nearly 346 billion Hong Kong dollars because most overseas investors exchanged their domestic currencies into Hong Kong dollars to purchase new shares and the profits of stock-issuing enterprises cannot immediately reflow to the Chinese mainland. Chan said that the inflow of the two kinds of funds led to the surge of 640 billion Hong Kong dollars, but they are not related to hot money.

Lu Ting, Chinese economist at the Bank of America Merrill Lynch, said that Chan's point of view is relatively objective. It is certain that some hot money has flown into Hong Kong but it is still in a normal fluctuation range.

Chan previously stressed that the current linked exchange rate system in Hong Kong is helpful to resist the inflow of hot money. He said that under the linked exchange rate system, the appreciation extent of the Hong Kong dollar against the U.S. dollar is less than other currencies and it will fluctuate following the U.S. dollar.

Meanwhile, the low interest in Hong Kong, as well as the fact that the exchange rate and interest rate are less attractive to foreign investors also reduced the inflow of hot money into Hong Kong. Moreover, even though foreign investors want to invest in Hong Kong's stock market or real estate, they must face risks and high transaction costs.

By People's Daily Online


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