HK dollar sturdy fortified by capital inflow and tight frequent actions by monetary authority

We anticipate HK exports figures to have grown 2.2% yoy versus the holiday-distorted 7.2% jump as the export data for March is to be released tomorrow. This should support our view that the external sector is expanding only reasonably, with increased shipments to the US offsetting weaker performance elsewhere. Import growth remains to be stagnant softer at 0.4% yoy.

But, spending numbers have been a bit conservative by vacationers to have curbed inventory build-up despite resilient domestic consumption.

Our expectations on the trade deficit will have remained wide at HKD 45bn. We remain positive on the Hong Kong dollar to be well supported by strong capital inflows, which has prompted consecutive sets of intrusion by the Hong Kong Monetary Authority recently.

Derivatives strategy:
USD/HKD is currently trading at 7.7506 on spot. With a slightly bullish anticipation on HK dollar against US$, it is advisable for US importers from HK to buy ATM put options provided their import exposures in HKD.