HKD: Pressured at 7.75
USD/HKD hit
7.7500, the lower bound of the trading band and prices below the figure were
even seen at some point yesterday as well as this morning. Pair was dragged by strong capital inflows from China
via the Shanghai-Hong Kong Stock Connect which lifted Hang Seng Index to a high
of 6.4% on 9 Apr. The south bound quota was used up on Wed, the first time it
happened since its launch on 17 Nov 2014.
Hong
Kong started experiencing a surge in capital flow after China Securities
Regulatory Commission (CSRC) allowed mutual funds to invest in Hong Kong shares
via the Shanghai-Hong Kong Stock Connect last week. Previously, mutual funds were only allowed to access
overseas markets only through the Qualified Domestic Institutional Investors
program.|
The daily
southbound quota may be raised from the current CNY10.5 bn, as hinted by the
Chairman of the Hong Kong Exchanges.
With authorities clearly putting the support behind the Shanghai-Hong Kong
Stock Connect, the HKD is poised to remain sticky at the lower bound of its
USD peg at 7.75. Our USD/HKD forecast is at 7.76 for end 2Q. Expect HKMA to
continue to intervene. Its latest injection of HKD3.1 bn to defend the
currency peg has increased the aggregate balance to HKD242.29. On the side
note, while the CNH has not been impacted at the moment, we expect fresh
interest in the Shanghai-Hong Kong Stock Connect to be positive for CNH in
the medium term. |
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