Commerzbank Highlight The HKMA’s Swelling Balance Sheet

Commerzbank note that "Hong Kong has been experiencing strong capital inflows since the beginning of this year, which has triggered many rounds of intervention from the HKMA to defend the linked exchange rate regime (LERS). Under the LERS, the HKMA needs to buy USD from the market when USD/HKD touches the lower band of LERS at HKD7.75. The strong capital inflows, which are probably chasing the stock rally of the tech firms, have in tandem increased the balance sheet of the HKMA, the city's de facto central bank. As a result, the aggregate balance of HKMA has climbed to the highest since 2018, which will continue to be a supportive factor for HKD. USD/HKD remains at the lower band at HKD7.75, which is likely to persist over the foreseeable future."