HKMA Defends Against BCA Research
The Hong Kong Monetary Authority stood up against Canada’s BCA Research and outlook for a «cataclysmic recession» in the city, calling the view «unsound».
Yesterday, BCA Research released a report claiming that Hong Kong faced imminent danger due to high credit from non-financial companies in the private sector, which topped a 32-country list at $1.4 trillion in the first quarter of 2020.
The research and investment advisory firm noted that while the city could see short-term relief by importing the Fed’s monetary policy, the current trajectory is heading towards perpetual leveraging until reaching a «cataclysmic recession».
In response, the HKMA has come out to call the projections «unsound» and detail some of the factors that were not considered.
Foreign Activities
According to the HKMA, BCA Research’s negative outlook does not consider several factors including, most notably, that credit extended by Hong Kong’s banking sector is often used for operations outside the region.
«To conclude that Hong Kong is vulnerable to macroprudential risk purely based on Hong Kong’s seemingly high private-sector credit is unsound,» according to an «SCMP» report citing a spokesperson from the central bank, who highlighted a low non-performing loan ratio of just 0.79 percent at the end of the second quarter.
«[And it] overlooks the HKMA’s regulatory policy responses and the fact that Hong Kong banks are among the top internationally in terms of safety and soundness indicators.»
