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Author: Tan KW   |   Latest post: Tue, 24 Nov 2020, 10:34 PM


Hong Kong liquidity to hit record high ahead of Ant IPO

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HONG KONG - Hong Kong's aggregate balance, an indicator of Hong Kong dollar liquidity, will hit an all time high on Oct. 29 as the world's largest IPO attracts cash into the financial hub.

Chinese fintech giant Ant Group is looking to raise up to US$34.4 billion in Hong Kong and Shanghai, with the offer split between the two cities.

Strong demand in Hong Kong means Ant is set to close its books early, Reuters reported on Tuesday, citing sources with direct knowledge of the matter.

The Hong Kong Monetary Authority (HKMA) sold HK$25.42 billion (US$3.28 billion) into the market in Hong Kong trading hours on Tuesday, after the local currency hit the strong end of its trading band, according to data released by the HKMA.

As a result, the aggregate balance - the sum of balances in commercial banks' clearing and reserve accounts maintained with the HKMA - will increase to HK$443.257 billion on Oct. 29.

This would surpass the previous record of HK$424 billion set in November 2015, according to data from Refinitiv's Eikon.

The Hong Kong dollar is pegged in a narrow range of 7.75-7.85 to the US dollar. The HKMA has been conducting sales in recent sessions to weaken the currency to keep it within that trading band.

"Since the schedule of Ant Group's IPO was confirmed, the market had been scrambling for HKD liquidity in the run-up to IPO .. As a result, HKMA intervened strongly last week and pushed the aggregate balance up," analysts at OCBC Wing Hang bank said in a Monday research note.

The IPO also coincides with the month end and the issuance of a government bond targeting retail investors, both of which also contributed to the demand for Hong Kong dollars.

Year to date, the HKMA has sold HK$369 billion into the market, the highest in a calendar year since 2009.


  - Reuters


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