Capital inflow to Hong Kong continues

The Hong Kong Monetary Authority (HKMA) yesterday injected HK$2.325bn money into the banking system to prevent HKD from rising beyond its fixed exchange rate. USD-HKD has been traded very close to its strong band of 7.75 since early September, due to strong capital inflows. As HKD pegs to USD, it is seen as a safe haven in Asia amid market turbulence. In the meantime, the expectation of further USD strength has encouraged capital inflows as well. 

Hong Kong acts as a bridge for onshore Chinese investors to connect overseas market. All these indicate that market expects upside in USD-CNY. From this perspective, strong capital inflows in Hong Kong could mirror the opposition in mainland China.

HKMA's aggregate balance increased to HK$340.1bn today, the highest since the global financial crisis, notes Commerzbank. Since June 2014, the monetary aggregate balance has doubled.