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Money flows and the HK banking system

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  1. #1

    Money flows and the HK banking system

    This piece on Bloomberg doesn't do any more than state the obvious, and the data is obviously lagging by at least a month, but it puts the potential for capital outflows to affect either the banking system or the USD/HKD peg into context.

    Four takeaways from me:

    1. the outflows are likely to be significant;
    2. the significance of the outflows is a very long way away from being likely to affect banking stability or the USD/HKD peg;
    3. there is no shortage of money which can continue to come down from the mainland to pick up assets in Hong Kong;
    4. bank margins could well be squeezed.

    https://www.bloomberg.com/news/artic...d=premium-asia


  2. #2
    For now, mainland investors are hunting for bargains as Hong Kong stocks fall: They added a net $8.4 billion to their holdings in the 28 trading sessions through Tuesday.
    I assume they are mainly buying mainland companies - as they usually do - including those that also listed in Shanghai...

  3. #3

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    Quote Originally Posted by Elefant&Castle:
    I assume they are mainly buying mainland companies - as they usually do - including those that also listed in Shanghai...
    I too would like to know what they typically buy - or are they targetting safe blue chips like Link REIT, CLP etc?

  4. #4

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    Quote Originally Posted by traineeinvestor:
    This piece on Bloomberg doesn't do any more than state the obvious, and the data is obviously lagging by at least a month, but it puts the potential for capital outflows to affect either the banking system or the USD/HKD peg into context.

    Four takeaways from me:

    1. the outflows are likely to be significant;
    2. the significance of the outflows is a very long way away from being likely to affect banking stability or the USD/HKD peg;
    3. there is no shortage of money which can continue to come down from the mainland to pick up assets in Hong Kong;
    4. bank margins could well be squeezed.
    - there are bound to be outflows, just as there will be inflows.. whether that will stress the banking system i doubt so.. asset prices will fluctuate because of the ins and outs, but the system itself is robust enough it should withstand such movements within the limit of reasonable market parameters (exchange rate, interest rates).

    - bank margins are squeezed when system is stable and new technologies/competitors come in to force banks to give up their cushy spreads.. in the last decade property prices been on the up so most banks do not suffer any credit impairment and spreads can provide for their profits... if system are stressed clients will have to act more harshly, and those usually improve spreads of banks.. if over-stressed then you see credit impairment which will affect bank margins..
    traineeinvestor likes this.