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Hong Kong monthly bank deposits leap 1.6% in biggest increase since 2018 IPO boom

July 31, 2020. Print article

Hong Kong bank accounts swelled to a two-year high as deposits jumped by about HKD 225.84 billion ($29.14 billion) in June, in a sign that the city’s financial markets remain resilient following political upheaval.

Deposits held in accounts rose by about 1.6%, exceeding HKD 14 trillion ($1.81 billion) total in the largest monthly increase the semi-autonomous city has seen since April 2018, Hong Kong’s de facto central bank said Friday.

While the June increase was smaller than its 2018 predecessor, the surge may reflect growing interest in Hong Kong’s slew of recent large initial public offerings, the South China Morning Post reported.

Deposits ticked up in June largely as foreign capital migrated to the city. According to CEO Eddie Yue, the territory has seen nearly $14 billion in inflows since April. 

Hong Kong dollar deposits climbed 2% in June, and foreign-currency deposits rose about 1%. The June increase followed a 0.3% decline in May and a 0.8% rise in April.

Yue said the capital influx showed Hong Kong’s resilience amid “heavy blows” from the coronavirus pandemic, U.S.-China tensions and social unrest related to a controversial new law.

“Our markets have continued to operate smoothly, which is a testament to both the robustness of our system and the markets’ confidence in us,” he said.

Earlier this month, Donald Trump signed legislation allowing him to sanction banks, businesses and individuals helping China impose a contentious national security law on Hong Kong. The city has previously enjoyed substantial autonomy since the U.K. transferred its sovereignty to China in 1997.

Trump also rescinded Hong Kong’s special trading status with the U.S. in a move observers feared could jeopardize the city’s financial market. Through the first half of 2020, bank deposits rose 3.5% over the comparable 2019 period.

Although the monetary authority didn’t provide details on recent deposit inflows, brokers believe that it is likely “hot money” from investors hunting for quick returns. Recent Hong Kong “mega IPOs” from online retailer JD.com and gaming company NetEase raised a combined $7 billion, according to the South China Morning Post.

April 2018 saw a 3.2% boost to bank deposits as several hugely oversubscribed IPOs came to market in Hong Kong.

The hot money surge has repeatedly pushed the Hong Kong dollar exchange rate above its upper limit, the monetary authority said. It has stepped into the market to sell about HKD 112.11 billion ($14.46 billion) to bring the local currency back within the authorized trading band.