Market turbulence and high volatility are likely to be the norm in financial markets amid the economic slowdown, declining loan growth and deteriorating asset quality, Hong Kong Monetary Authority chief Norman Chan Tak-lam warned.
However, Chan said it is unlikely the city’s currency will again face speculative attacks similar to what happened during the 1997 Asian financial crisis, the Hong Kong Economic Journal reported on Tuesday.
Speculators would need enormous funds to short the Hong Kong dollar given the more prudential dynamics in the city’s financial market, fiscal position and stock market, Chan said.
The de facto central bank is confident of its ability to defend the currency’s peg to the US dollar with counter-cyclical measures in place, he added.
Hedge funds have been targeting the Chinese currency, but this will not pose any threat to the city’s status as an offshore renminbi hub in the medium or long term, Chan said.
The city’s renminbi liquidity shrank 12 percent in September and October, following the devaluation of the currency in August. However, it rose 5 percent in December from the previous month.
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