Latest news with #HongKongMonetaryAuthority
RTHK
9 hours ago
- Business
- RTHK
HKers can use FPS for payments up north from Sunday
HKers can use FPS for payments up north from Sunday HKMA chief executive Eddie Yue says Payment Connect will allow local residents to make transfers of small sums in a much simpler way. Photo: RTHK China's central bank governor Pan Gongsheng hails Payment Connect as a milestone in deepening financial connectivity between Hong Kong and the mainland. Photo: RTHK Residents from Hong Kong and the mainland will soon be able to use a new fast payment tool to conduct cross-border transactions involving small sums in real time from Sunday, with monetary authorities from both sides hailing the launch as a milestone in deepening connectivity. The announcement came after the Hong Kong Monetary Authority's launch on Friday of the cross-border payment method, Payment Connect, which links its electronic payment network – Faster Payment System (FPS) – with the mainland's Internet Banking Payment System. The linkage allows cross-bank transactions using simply the recipients' mobile numbers or account numbers, with small-value payments settled instantly at any time. "I'm very much looking forward to Sunday when we will further connect the fast payment systems between Hong Kong and the mainland using Payment Connect, as it breaks through the boundaries of time and place," HKMA chief executive Eddie Yue said at the launching ceremony in Beijing. "Residents from both places will only need to click on our phones, enter the recipient's mobile phone number, and they can easily make small personal remittances or pay for various living expenses [using it], achieving simple and immediate transfers," he said, adding that the FPS system has been very popular among Hong Kong residents since 2018. Under the new service, residents can use FPS to transfer small sums of up to HK$10,000 each day per account to the mainland, while the total annual remittance limit is set at HK$200,000. And such transfers will not affect another 80,000 yuan of northbound daily quota set for local residents. While there's no limit set for mainland residents using the tool for southbound transfers, they will still be subject to the current annual foreign exchange quota of US$50,000 per person. The launch of the tool also comes as the number of FPS users closes on 17 million, with one million new accounts being set up in the first five months of the year. The number of registered users is far more than the total population of Hong Kong as an individual can have more than one account. For his part, People's Bank of China governor Pan Gongsheng said the launch marks another milestone in the deepening of financial connectivity between Hong Kong and the mainland, as Beijing highly values the SAR as a global financial centre. "The cross-border Payment Connect, which is directly connected to the infrastructure of the monetary authorities of the two places, provides online fast bilateral local currency and bilateral renminbi remittance services for residents of the two places, which will further enhance the efficiency and experience of cross-border payments," he said. "It'll also provide conveniences for economic and trade cooperation as well as personnel exchanges between Hong Kong and the mainland, injecting new vitality into Hong Kong's development while further promoting the cross-border adoption of the renminbi," he added. The two sides have been working on the service since August. The new tool will see six SAR banks join the first batch of institutions to provide such services – Bank of China (Hong Kong), HSBC, Hang Seng Bank, Bank of East Asia, as well as two state-backed lenders. There'll also be six mainland banks supporting the tool.
Asia Times
11 hours ago
- Business
- Asia Times
Hong Kong's stablecoin moment eclipses dollar peg debate
As global markets obsess over Hong Kong's 42-year-old currency peg to the US dollar, Financial Secretary Paul Chan seems more intrigued by the next four decades for the city's economy. The currency speculators testing the Hong Kong monetary authority have a point, of course. The Hong Kong dollar is experiencing extreme volatility as the US exchange rate gyrates amid questions about Donald Trump's tariffs and the direction of US Federal Reserve policy. To be sure, there is no serious discussion about Hong Kong abandoning its current 7.75–7.85 fixed rate band to the US dollar anytime soon. But the Trump 2.0 era financial chaos is straining the peg as rarely before. That has Hong Kong policymakers and markets alike wondering if there is a better currency framework for the city. But the real intrigue in Chan's office lies in implementing Hong Kong's new stablecoin legislation. By expanding its cryptocurrency licensing regime and embracing an 'open model' system for digital assets, Chan's administration hopes to morph Hong Kong into a crypto hub. The plan is to encourage overseas institutions to issue such cryptocurrencies in Hong Kong. Not only might it boost competitiveness, but it also offers the city a first-mover advantage over the US and Singapore in global payments. Chan puts the global market value of stablecoins at about US$240 billion, with trading volume topping $20 trillion in 2024. As the Hong Kong Monetary Authority puts it, the bill will 'enhance Hong Kong's existing regulatory framework on virtual-asset activities, thereby fostering financial stability and encouraging financial innovation.' Hong Kong was early to the space. In 2023, regulators launched a virtual asset licensing regime. It requires crypto firms that officially operate in Hong Kong to obtain licenses and meet certain standards to ensure the protection of retail investors. 'Hong Kong's new stablecoin policy sets a global benchmark by mandating full reserve backing, strict redemption guarantees and HKMA oversight,' YeFeng Gong, risk and strategy director of HashKey OTC, tells CNBC. The idea is that once there are global payments systems on blockchain for companies and consumers, the impacts of sanctions, tariffs and other kinds of trade curbs will be mitigated. In theory, average citizens may be able to use HK dollar stablecoins to settle overseas purchases through apps like Alibaba Group's Alipay as early as next year, with the exchange rate difference dropping to zero. It's the nightmare moment many banks have been dreading. The US, too, presumably. In March, US Treasury Secretary Scott Bessent said the US would use stablecoins to ensure the US dollar hegemony in payments and protect its reserve-currency status. 'As President Trump has directed,' Bessent said, 'we are going to keep the US dollar the dominant reserve currency in the world, and we will use stablecoins to do that.' Of course, the US is having enough trouble with 'fiat' money. A 'lackluster' auction of US Treasury securities fueled worries about disappearing demand while the supply of new debt increases. This came amid Moody's Investors Service's downgrading of the US's AAA credit rating as national debt heads toward $37 trillion. Ray Dalio, founder of Bridgewater Associates, says Washington's fiscal trajectory is a bigger-than-acknowledged. Mark Haefele, chief investment officer at UBS Global Wealth Management, says that 'while the selling of US Treasuries in the immediate aftermath of the Moody's downgrade was relatively modest, Treasury yields have climbed steadily since the end of April as budget negotiations have come to the fore.' Could stablecoins help address the problem? In a May 2025 study, Sang Rae Kim, economist at Kyung Hee University, looked at how reserve-backed stablecoins affect the Treasury markets and credit intermediation. Kim found that large stablecoin 'issuance events induce statistically significant increases in Treasury prices.' Yet as Chan's team plans for the future, current economic dislocations are creating challenges. Not least of which is being caught between a brawling US and China. Even so, it's worth remembering that Hong Kong's currency peg is the ultimate 'widow maker' trade. For more than two decades, hedge fund managers, George Soros most famously, have tested the HKMA. The peg endured years later, even as speculative investors like Kyle Bass, founder of Hayman Capital Management, and Bill Ackman, chairman of hedge fund Pershing Square Capital Management, bet against it. Through assertive market intervention and fancy footwork, the HKMA has preserved the roughly 7.8 exchange rate established in 1983. For generations, Hong Kong's iron-clad link to the world's reserve currency served the economy well. Stability affords investment banks, exporters and entrepreneurs confidence to headquarter Asian operations in the city. It has long been touted as Hong Kong's secret weapon. The most famous such assault came in 1997 and 1998 from Soros, who 'broke' the British pound. After attacking the Malaysian ringgit and Thai baht, Soros targeted Hong Kong's peg and stocks. He lost. The HKMA overwhelmed Soros and his acolytes with a $15 billion show of force. In targeting Hong Kong in recent years, hedge fund players like Bass tested Chinese leader Xi Jinping's mettle. One big worry is control. Hence, economist Zhou Luohua of Renmin University of China calls the peg the economy's 'Achilles' heel.' 'If property and stock prices start to fall, the Hong Kong Monetary Authority can't provide sufficient liquidity like the Federal Reserve or other central banks as its money supply capacity is determined by the size of its US dollar reserves,' Zhou explains. 'If asset prices are plunging, it would trigger an exodus of funds at the same time, translating into a 'double hit' for the Hong Kong economy.' In April 2018, former HKMA head Joseph Yam argued it's time to scrap the peg so that Hong Kong can protect itself in times of turmoil. As China reduces capital controls, Yam worried 'small' Hong Kong risks getting swamped by 'huge' mainland money flows. There are some options, of course. The most obvious: soften the peg by establishing a Singapore-style basket of currencies. If the HKMA has greater flexibility, it could more easily vanquish the Soros's and Bass's of the world as well as property hoarders. Maintaining the status quo, Yam cautions, means even less affordable housing. It also makes Hong Kong more of an arbitrage vehicle between US and Chinese investors than a place that shares its fruits with middle-class households. Still, odds are that the peg is not going anywhere anytime soon. The protests in recent years challenging China's influence came as Trump's tariffs – both from 2017 to 2021 and now – throw Xi's economy off balance. China might decide that now isn't the time for experimentation with the dollar peg. Yet there is experimentation in the digital asset space that could render these 'old economy' concerns moot. And help Hong Kong get its financial groove back in short order. Follow William Pesek on X at @WilliamPesek
RTHK
a day ago
- Business
- RTHK
HK stocks end up plunging as Mideast fuels selloff
HK stocks end up plunging as Mideast fuels selloff The Hang Seng Index ended the day sharply down by 472.95 points, or 1.99 percent, to close at 23,237.74. File photo: RTHK Stocks in mainland China and Hong Kong ended up tumbling on Thursday as mounting conflict in the Middle East rattled investor confidence, fuelling a broad selloff across sectors. In Hong Kong, the benchmark Hang Seng Index ended trading for the day sharply down 472.95 points, or 1.99 percent, to close at 23,237.74. The Hang Seng China Enterprises Index lost 2.13 percent to end at 8,410.94 while the Hang Seng Tech Index dipped 2.42 percent to close at 5,088.32. Tech and healthcare sectors were among biggest losers, down 2.4 percent and 3.2 percent respectively. Seasoning maker Foshan Haitian Flavouring surged as much as 4.7 percent in its first day of trading in Hong Kong. The market's losses came as the Hong Kong Monetary Authority said the outlook for the direction of the Hong Kong dollar and for interbank rates remains uncertain due to carry trades and other factors. The city's de-facto central bank made the comments in response to the US Federal Reserve's overnight decision to keep rates unchanged. Up north, the benchmark Shanghai Composite Index ended down 0.79 percent at 3,362.11 while the Shenzhen Component Index closed 1.21 percent lower at 10,051.97. The combined turnover of these two indices stood at over 1.25 trillion yuan, up from 1.19 trillion yuan on the previous trading day. Shares in the chemical fiber, apparel and transportation sectors suffered the most, while those related to oil, media and entertainment rallied. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, lost 1.36 percent to close at 2,026.82. Weakness was across the board, with the CSI rare earth sector sub-index down 1.9 percent, the real estate index down 1.7 percent and the defence sub-index down 1.8 percent. Sentiment across the region remained weak as geopolitical conflicts showed no sign of easing, with Iran and Israel exchanging further air strikes on Thursday, while the United States weighed the possibility of joining the attacks on Iran. Meanwhile, this week's much-hyped Lujiazui Forum in Shanghai offered few fresh measures to bolster the market, also leaving investors in search of policy direction. The market is now "switching back to defensive mode", with indexes and volume both weak, analysts at Goldman Sachs said in a client note. Though sentiment has improved after a Sino-US trade truce last month in Geneva, China's long-term prospects remain in doubt, according to the Bank of America's latest fund manager survey. The survey noted that most fund managers in Asia still expect a structural de-rating to get underway in the world's second-largest economy. (Reuters/Xinhua)
Business Times
a day ago
- Business
- Business Times
Hong Kong Monetary Authority says outlook for local currency uncertain
[HONG KONG] The Hong Kong Monetary Authority (HKMA) said on Thursday (Jun 19) the outlook for the direction of the Hong Kong dollar and for interbank rates remains uncertain due to carry trades and other factors. The city's de-facto central bank made the comments in response to the US Federal Reserve's overnight decision to keep rates unchanged. 'If carry trades are to persist, the Hong Kong dollar exchange rate may weaken further, and may even trigger the weak-side,' HKMA said, referring to the possibility of the currency hitting 7.85 per US dollar. The Hong Kong dollar is pegged in a tight band between 7.75 and 7.85 to the US dollar. It whipsawed from one end of its narrow trading band to the other in just a few weeks over May and June, as foreign and Chinese capital flocked to blockbuster share offerings or picked up undervalued stocks in Hong Kong. That caused domestic interbank rates to plunge, spurring speculative positions that used borrowings in the Hong Kong dollar to bet on other markets. The Hong Kong dollar has for weeks languished near the weak end of its band and last stood at 7.8498 per US dollar. Analysts at HSBC said in their currency outlook report that the Hong Kong dollar may 'soon test 7.85'. However, they said that the HKMA has sufficient foreign exchange reserves to defend the currency when it hits the 7.85 per US dollar level. REUTERS
Business Times
7 days ago
- Business
- Business Times
Hong Kong – Canary in a goldmine
THE perception of Hong Kong's decline as a financial hub and desirable place to live is both understandable yet overstated. During a recent business trip to Europe, one consistent reaction stood out: Clients' faces flashed with concern and sympathy when I mentioned I was based in Hong Kong. I get it. For years, the narrative around Hong Kong has been relentlessly downbeat: falling property prices; the 2019 protests; Covid lockdowns; expat departures; strained US-China relations; and renewed worries about the stability of the HKD-USD peg. The concerns are valid but, as I argue below, also misplaced. Which major equity market has outperformed most others in 2025? Which market ranks fourth globally by capitalisation, trailing only the United States, mainland China, and Japan? Which market raised more in IPOs than Europe's exchanges combined this year? And which economy welcomed more tourists than Japan from January to May 2025? If you answered Hong Kong to all, you're absolutely correct. Surprised? Let me explain. Golden goose My optimism about Hong Kong's future hinges on its currency: the Hong Kong dollar (HKD). Within the Greater China region, no other city matches its currency's liquidity and convertibility (with apologies to Macau's pataca). Corporate China's unquenchable demand to recycle hard currency is well known, and until the renminbi becomes convertible – likely a distant prospect – Hong Kong's role as China's premier funding conduit remains secure. But what about the HKD-USD peg's vulnerabilities? Recent media reports have highlighted pressures on the peg, and these concerns are reasonable. Yet, the strain isn't from capital flight; it's the opposite. Inflows from IPOs, dividends, and investment opportunities are so robust that the Hong Kong Monetary Authority (HKMA) had to sell some HK$47 billion (S$7.6 billion) in May 2025 to temper HKD appreciation. Of course, an appreciating currency is a nice problem to have, as are interest rates at – or close to – record lows. But, either way, both are still problems if allowed to endure, potentially distorting the allocation of capital. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up To be fair, the allure of a USD carry trade (selling HKD and investing in US money market funds for example) has seen the HKD's value normalise. But even two weeks on from the last mega-IPO, the monetary system remains awash with liquidity, allowing banks to reset mortgages rate lower and allowing refinancing opportunities for the beleaguered commercial real estate sector. Local hero With roughly comparable populations, land mass, and economic size, the friendly competition between Hong Kong and Singapore as rival business centres is as storied as it is long-running. Anyone who has recently visited Singapore will have been mightily impressed by the energy, opportunity, and confidence that the city state currently exudes; and might conclude – reasonably – that Hong Kong has (temporarily) lost its mojo to its ascendent challenger. Yet, Hong Kong's role as China's financial gateway also gives it both a role and an edge, certainly in the ability to offer local companies liquidity for financing purposes. For example, Hong Kong's stock market has a total market capitalisation of US$6.3 trillion, entirely dwarfing Singapore's at merely US$0.5 trillion, a 13-fold difference. As China corporates consider delisting from the US or dual list in Hong Kong, one can assume Hong Kong's market capitalisation may likely increase. Admittedly something of a stealth rally, the Hang Seng Index (HSI)'s year-to-date performance – largely complementing and reflecting renewed interest in China – may also have attracted international investors. At time of writing, the HSI was up 21 per cent on the year, outperforming the majority of competitor markets. My sense is as investors rotate thematically from US exceptionalism to – among other things – (China-centric) emerging market opportunities, local equities may further benefit in the months and quarters to come. Canary's fragility Yet for all Hong Kong's recent positives, as a financial entrepot it is both sensitive and vulnerable to the volatilities of global trade. And that is unlikely to change anytime soon. Thus, strained trade relations between the US and China – and the risk of high tariffs being imposed by the former on the latter – will negatively impact the city's fortunes. Inevitably, Hong Kong reliance on mainland inflows – with some 80 per cent of Hong Kong Exchanges and Clearing's market cap tied to Chinese firms – exposes it to China's economic slowdown risks. Escalating geopolitical tensions or a faltering Chinese economy could trigger occasional liquidity shocks, potentially derailing Hong Kong's markets for a while. At Lombard Odier, we are overweight equities, including those in emerging markets. Our preferred way to access China risk is via Hong Kong's H Share market. Thus far, it has been a satisfactory trade. But Hong Kong's East-West history positions it – somewhat uniquely – in the crosshairs of tensions between the world's two great superpowers. Hong Kong's resilience is well known and well regarded; but shouldn't be taken for granted. The writer is chief investment officer, Asia, at Lombard Odier
