For all the debate of the future of Hong Kong, investors for now anyway are clamoring for the city’s currency.
The pegged Hong Kong dollar climbed to the strong end of its permitted trading band late Thursday U.S. time, prompting intervention by the de facto central bank. Another round occurred Friday during Asian trade. While concern about looming national-security legislation has spurred speculation about capital outflows, demand for the local currency has risen as investors seek a slice of highly sought share sales in Hong Kong by Chinese tech firms.
The schism underscores the discordant views on how Hong Kong will fare amid rising U.S.-China tensions. Beijing is keen to sustain the former British colony’s role as global financial center, mainland capital has flooded into the local stock market and Chinese firms have lined up to list there. Meanwhile, some locals are hedging against an uncertain political future by amassing foreign exchange and looking at avenues for emigration.
The Hong Kong Monetary Authority sold HK$4.85 billion ($626 million) of the city’s currency on Friday, according to its page on Bloomberg. That was its first intervention since April 27. The aggregate balance, a measure of interbank liquidity, will increase to almost HK$100 billion from Tuesday, the highest since August 2018.
Mainland money keeps flowing into Hong Kong’s stock market through exchange links with Shanghai and Shenzhen. Eligible investors, which can include brokers and insurers or individuals with at least 500,000 yuan ($70,000) in their trading accounts, purchased another HK$775 million on average each day this week. They had already been net buyers of Hong Kong stocks for 35 consecutive weeks.
Plans from some of China’s biggest companies to sell shares in Hong Kong are increasing the demand for cash, helping boost the local dollar. NetEase this week raised about $2.7 billion in Hong Kong, with local media saying the the retail portion was more than 130 times oversubscribed. Online retailer JD.com Inc. started taking orders for its shares on Friday, and Yum China Holdings Inc. has also hired banks for a listing this year.