SHANGHAI, Jan 22 (Reuters) - Heavy foreign flows into Hong
Kong's stock market drove borrowing costs to multi-year lows
this week, prompting investors to suspect there won't be any
need for the customary official liquidity support ahead of the
upcoming Lunar New Year holiday.
Hong Kong's interbank offered rate, a gauge that measures
cash conditions in the financial hub, eased to around 0.17% in
the two-month tenor on Friday, its weakest since Feb
2011. The three-month HIBOR slid to 0.24018%, its
lowest since March 2011. Short term money rates also edged
The massive amounts of Chinese and foreign cash pouring into
Hong Kong have pushed the benchmark Hang Seng Index above
30,000 point mark for the first time since May 2019 this week,
and it has gained more than 8% this year.
Analysts said the sharp bounce in Hong Kong stocks came
after panic selling in some Chinese stocks prompted by a U.S.
investment ban, as Asian and European investors hunted for
bargains as giant American funds dumped shares.
Mainland investment euphoria has also spilt across the
border, with a record amount of Chinese money gushing into Hong
Kong-listed Chinese tech stocks via the Stock Connect trading
Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong
Kong said Hong Kong's monetary authority was unlikely to inject
additional funds, as it usually does, before this year's Lunar
New Year holiday - a time when cash demand usually rises.
"Liquidity is already too much," Cheung said. "HKMA seems to
be more inclined to keep liquidity stable, and given the broad
economy is still recovering."
Cheung expects the city's abundant liquidity conditions to
persist for a while, with no major reason for outflows, such as
high-profile IPOs, on the horizon.
The Hong Kong dollar, which has stayed near the
stronger end of its 7.75-7.85 per U.S. dollar band this week,
last traded at 7.7520.
(Reporting by Winni Zhou and Andrew Galbraith
Editing by Vidya Ranganathan)