First week of July reported Hong Kong's
first foreign exchange involvement in almost two years to curb
currency strength and analysts expect more of the same in the weeks
ahead.
The reason behind this intervention as
per analyst is, "renewed optimism towards China's equity market
and strong flows into Hong Kong's bond and stock markets should keep
upward pressure on the Hong Kong dollar".
The Hong Kong Monetary Authority
(HKMA), the city's regulator central bank, said on Wednesday it
bought $2.1 billion over two days to contain gains in the local
currency.
Official data this week showed China’s
factory activity ran at the fastest pace this year in June. A
services purchasing managers’ index was the highest since March
2013.
The H-share gauge closed this year’s
fall at 3.4 percent. Government shortlisted targeted pointers
including reserve ratio cuts to fight the slowdown. The measure
traded at 7.3 times estimated earnings at the last close, referred to
Hang Seng Index at 10.9 and 16.7 for the Standard & Poor’s 500
Index.
Hong Kong’s May retail sales by
volume fell 4.7 percent from a year earlier, exceeding economists’
median estimate for a 3.8 percent dropped, while sales by value
slipped 4.1 percent, the city’s government said on its website
yesterday.
Hong Kong is often said to be a probing
entity for China. Therefore, investors who are looking for exposure
for trading in Chinese markets often buy assets in Hong Kong first.
The Hang Seng stock index is up 3
percent over the past five days with unpredicted performance. HSI
surged 2.6 percent in MSCI's broadest index of Asia-Pacific shares
outside of Japan.
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