The Hong Kong dollar’s decades-old peg to the US greenback could be at risk, analysts warned Wednesday, as local stocks took another pummelling in an Asia-wide rout.
Shares on the Hang Seng Index plunged 3.82 percent to end near four-year lows, hit by fears over the health of the Chinese economy and weak oil prices, with mainland-linked chips taking a hammering.
The bourse has slumped almost 14 percent since the start of the year.
The sell-off has put huge pressure on the Hong Kong dollar, which has sunk to its weakest level against the US unit since 2007 as the city’s once alluring access to Chinese assets looks less attractive to investors.
This has led to a vicious circle whereby traders are seeing the falling dollar as a sign of capital outflows, which in turn leads them to continue selling stocks and hurting the currency.
“The last few days the weakened Hong Kong dollar is affecting the investment sentiment, people are worrying that funds are going out of Hong Kong markets… that’s sending a pretty negative perspective,” financial analyst Jackson Wong said.
And Francis Lun, of Hong Kong brokerage GEO Securities told AFP that traders “are speculating the Hong Kong dollar peg may collapse”.
“There is a lot of speculative money around the world,” he said, but added that the city’s government had enough firepower to defend the 32-year-old peg. Read more