USD/HKD likely to trade tad higher in the coming sessions owing to release of investor capital locked-in by IPO: Scotiabank

The USD/HKD currency pair is expected to trade a bit higher towards the weak end of the 7.75-7.85 trading band again in the coming sessions due to the release of investor capital locked-in by an IPO, according to the latest research report from Scotiabank.

The HKMA is also expected to continue to firmly defend the weak-side Convertibility Undertaking (CU) with the capability guaranteed by the Currency Board system. After that, the HKD Hibor will remain supported amid other upcoming IPOs and climb further in tandem with the Fed’s future rate hikes, which could see the HKD IRS rates trading even higher.

Further, the HKD Hibor is expected to retreat somewhat as 'Ping An Good Doctor', China’s largest online medical services app, will start trading on the HKEx’s main board on May 4. The HKD376.8 billion worth of capital locked-in will be released one day before the debut, similar to what happened last November.

China Literature, Razer and Yixin Group froze HKD520.0 billion, HKD124.0 billion and HKD380.0 billion in retail investor capital respectively during their individual IPO subscription period from late October to early November 2017.

Meanwhile, 'Ping A Good Doctor', will raise HKD8.77 billion after its flotation on April 23-26, the biggest IPO in Hong Kong SAR this year. With attracting HKD376.8 billion in retail investor capital, this IPO was overbought by 653 times as the most sought-after one in the SAR since 2009.

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