Hong Kong Protests: Peg-Xit?
ING
«There's been increasing speculation about Hong Kong's dollar peg, mainly because protests have lasted longer than expected,» said a report by Iris Pang, Greater China economist at ING.
«During times of high volatility or uncertainty in the asset market, changes to the linked exchange rate system, be it the linked currency or the band, could trigger speculation about further changes. This would create a lot of betting on USD/HKD and could hurt the HKMA's credibility. As such, it is not an appropriate policy action at this time, particularly because it would do nothing to address the demands of protestors.»
The bank projects USD/HKD to decrease to 7.82 and HIBOR to increase to 2.55 by the year-end due to the effects of margin financing from expected mega-sized IPOs in the second half of 2019.
«The HKD is freely traded internationally, which is important for China to do businesses with the rest of the world,» Pang added. «We expect the Hong Kong Monetary Authority to stick to the existing linked exchange rate system, now more than ever.»
