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Flows Push Hong Kong Dollar To Strongest In A Week


HKD bid in Asia, hitting the highest levels in a week against the greenback. USD/HKD last at 7.7525. HKD is benefitting from the dual influences of a weaker US dollar on broad risk positive sentiment, and equity flows.

  • With the Hang Seng Index up ~11% since its December trough (as of Monday's close) we flag that net Shanghai-Hong Kong Stock Connect southbound flows have printed in positive territory (money flowing into Hong Kong stocks from China) for 19 consecutive sessions, with 2 of those days accounting for the 2 largest rounds of net southbound flows into Hong Kong stocks on record (going back to late 2016).

Net Shanghai-Hong Kong Stock Connect Southbound Flows (HK$bn)

  • There are some headwinds for the currency. Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor spoke yesterday at the 14th Asian Financial Forum and said if the Covid-19 vaccines are as successful as expected, there will be real momentum for an economic recovery in the second half of the year. GDP is expected to shrink by 6.1% in 2020 (data on Jan 29), the steepest decline on record.

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