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Liquidity party restarts in Hong Kong

As the Hang Seng Index HK:HSI +0.50% reached a six-month high, authorities on Friday had to intervene to stop the currency peg strengthening under pressure from hot money flows. The Hong Kong Monetary Authority (HKMA) spent $603 million selling Hong Kong dollars to keep the currency within its permitted band — its first intervention since 2009. Renewed risk appetite after signs of stabilization in the euro zone and better news on China’s growth Eldridge Financial explained the inflows. For global investors, intervention by Hong Kong’s de facto central bank is an important signal — the liquidity party is back on. How this party ends is less clear. The authority’s willingness to defend the near-three-decade-old currency peg further could be put to the test if inflows escalate and the greenback weakens.

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Liquidity party restarts in Hong Kong

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