HKEX_Comments
05-06

Recently, the Hong Kong dollar (HKD) has surged in strength, and during the New York trading session on Saturday, May 3, it triggered the strong-side Convertibility Undertaking of the Linked Exchange Rate System at HK$7.75 to US$1. This prompted the Hong Kong Monetary Authority (HKMA) to intervene in the market, absorbing as much as US$6.005 billion in sell orders and injecting HK$46.539 billion into the system. This marks not only the first time since 2020 that the strong-side convertibility guarantee has been activated, but also the HKMA’s largest single-day capital injection on record.

Multiple Drivers Behind HKD Strength

According to an HKMA spokesperson, the recent strength of the Hong Kong dollar has been driven by several factors. First, equity investment activities have led to increased demand for HKD, particularly amid a surge in large IPOs, where investors need to convert funds into HKD for subscription. For instance, the IPO of $AUNTEA JENNY(02589)$ attracted margin orders totaling HK$92.1 billion—an oversubscription of nearly 3,376 times—freezing a significant amount of market liquidity and becoming a key force behind the HKD’s rise.

Secondly, regional currencies such as the Chinese yuan and Japanese yen have broadly appreciated against the US dollar, indirectly supporting the HKD. Meanwhile, recent U.S. policies, such as the implementation of "reciprocal tariffs," have shaken investor confidence in U.S. assets, prompting some capital to shift into HKD as a risk-averse move. This capital flow is reflected not only in the forex market but also in financial indicators such as the Hong Kong Interbank Offered Rate (HIBOR) and the aggregate balance of the banking system.

HKD Strengthens: Can China Stocks' Rally Continue?
On May 7, the Governor of the People's Bank of China, Pan Gongsheng, announced a 0.5 percentage point RRR cut, injecting approximately 1 trillion yuan of long-term liquidity into the market. A package of policies to support financing for SMEs will be launched soon. Chinese assets surged in response to these favorable policies. Some believe that Chinese concept stocks are still at low levels, as major tech stocks remain undervalued. Are you bullish on China stocks continued rally? Are they still undervalued or not? How will stronger HKD affect HK stock market?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment