Hong Kong denies 10 trillion HKD of hot money inflow

11:22, December 03, 2010      

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On Dec. 1, KC Chan, secretary for Hong Kong's Financial Services and the Treasury, denied a report on the inflow of as much as 10 trillion H.K. dollars of hot money in different forms, such as hedge funds, into Hong Kong.

Chan’s remarks come just on the heels of a similar statement from the Hong Kong Monetary Authority (HKMA), which recently dismissed rumors that 640 billion Hong Kong dollars of hot money was flowing into Hong Kong.

Chan said that the report was groundless because assets operated by hedge fund firms in Hong Kong total only about 500 billion Hong Kong dollars and they can only be invested in the Chinese mainland through the QFII (Qualified Foreign Institutional Investors) scheme.

Earlier, a media agency from the Chinese mainland quoted an economist at Bank of China Hong Kong as saying, "The trend is increasingly evident for the inflow of hedge funds into Hong Kong. For instance, given the 9 billion U.S. dollars of hedge funds invested by investor George Soros’ Quantum Fund in Hong Kong and other sources, the amount of hedge funds will perhaps top 10 trillion Hong Kong dollars by the end of 2010."

Chan stressed that the hedge fund assets across the world total about 16 trillion H.K. dollars, only 500 billion of which are in Hong Kong and mainly aimed at investing in Hong Kong and Asian markets. He said that the supervision mechanism in the Chinese mainland is very strict, and hedge funds cannot invest in the Chinese mainland market at will.

If overseas funds want to invest in the Chinese mainland, they must be routed through the QFII scheme. According to data from the monetary authority, most funds that flew into Hong Kong in 2008 and 2009 were associated with the withdrawal of funds from abroad and IPOs and had nothing to do with hot money. However, Chan said the Hong Kong government will continue to pay close attention to the inflow of funds into Hong Kong.

According to the data released by the People's Bank of China on Nov. 26, the new funds outstanding for foreign exchange stood at as high as 519 billion yuan in October, the highest over the past 30 months and close to the previous peak of 525 billion yuan in April 2008, so the attitude of market actors is generally that an enormous amount of hot money has flown into the Chinese mainland.

By People's Daily Online


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