© Reuters. Hong Kong Dollars strength to continue with ant Groups Mega Listing
(Bloomberg) – Ant Group’s sale of mega-shares is likely to increase demand for Hong Kong dollars, with the exchange rate being strongest when trading and allowing government intervention is allowed.
The Hong Kong dollar has repeatedly touched 7.75 against the greenback this week, the strongest it can technically trade. It has prompted the city’s de facto central bank to sell the local currency for the first time in three weeks to defend its currency for the US dollar.
The strength comes when billionaire Jack Ma’s fintech giant Ant filed a double listing in Hong Kong and Shanghai on Tuesday, which could total $ 30 billion and exceed Saudi Aramco’s record-breaking public offering. Big lists like this often increase the demand for financing because investors have to set aside cash to buy the shares.
“We expect the Hong Kong dollar to test 7.75 again in the near future,” said Carie Li, an economist at OCBC Wing Hang Bank. “More IPOs and secondary listing of companies listed in the United States will increase demand for Hong Kong dollars. Meanwhile, the optimal investment mood and global liquidity can lead to an influx of stocks. ”
The Hong Kong dollar has been hovering near the strong end of its trade bond since April, pulling the death knell of a long bear trade and escalating tensions between China and the US. The force has caused authorities to sell the equivalent of $ 14.8 billion of local currency to weaken it. The maneuvers have expanded the interbank liquidity pool to the largest since 2017 and sent a one-month interest rate on the currency to a four-year low.
Past mega-listings have also caused dramatic increases in interbank borrowing costs, known as Hibor. In 2018, the one-month tenor rose to the highest level in a decade ahead of Xiaomi (OTC 🙂 Corp.’s $ 4.7 billion IPO. Financing costs also increased last year in the months before a $ 11 billion share sale at Alibaba (NYSE 🙂 Group Holding Ltd.
The Hong Kong dollar changed slightly at 7.7503 from 11:39 local time. One month Hibor was stable at 0.26089% on Thursday. The rate affects the cost of everything from mortgages to corporate loans.
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