The huge amounts of capital entering the Hong Kong stock market since last week could flow into the housing market, the chief executive of the Hong Kong Monetary Authority said Wednesday.
“Hong Kong is a free market. There is no limitation [on capital going] into the stock market or … other things,” said Norman Chan Tak-lam, who heads the city’s de facto central bank.
“I do not rule out the possibility that the funds will be interested in the housing market, but we do not have the exact data.”
Chan also said that it will take more time to see the effects of the latest round of housing curbs, announced Feb. 27.
Sales of first-hand residential properties are quite good, but transactions in second-hand homes have dropped, he said.
The market-cooling measures included capping the loan-to-value ratio for residential properties under HK$7 million at 60 percent, down from a range of 60-70 percent.
The maximum debt-service ratio, which is the size of monthly mortgage repayments as a percentage of the borrower’s monthly income, was also lowered, to 40 per cent from 50 per cent.
The Monetary Authority injected more than HK$30 billion into the Hong Kong market last week, partly because of the buoyant stock market.
“The Hong Kong stock market has been doing quite well, with record highs in index levels as well as trading volume. Surely that has triggered a lot of demand for Hong Kong dollars to buy the shares,” Chan said.
The Hang Seng Index reached a seven-year high of more than 28,000 points Monday on investors’ bets that the daily trading quota for Shanghai-Hong Kong Stock Connect will be relaxed.
On Wednesday, the index closed 0.21 percent higher at 27,618 points.
Daily turnover on the exchange had exceeded HK$200 billion for six straight days.
Hong Kong investors should learn the new characteristics of the city’s stock market after the launch of the Shanghai-Hong Kong Stock Connect, as mainland investors’ preferences can now influence local stock prices, Chan said.
“Capital flows between Hong Kong and the mainland will be more frequent than before. At the same time, volatility in the Hong Kong stock market may be greater,” he said.
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