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HKMA Intervention, IPO Expectations Fuelling HKD Gyrations

  • Some attention being paid to the notable move in HKD forward points this week, with 12m HKD forward points discount hitting 625 points yesterday, the largest discount since 2019.
  • The move follows a retreat for USD/HKD from the upper-end of the trading band earlier this week, as well as a continued ratchet higher for the interbank rate, with O/N HIBOR rising to north of 3.00% on Monday, a considerable move off 0.75% the week previously.
  • What is driving these moves? HKMA intervention to buy HKD is certainly partially responsible, but contracting interbank liquidity in Hong Kong is often also correlated with demand for sizeable IPOs. China's steps last week to loosen the regulations around Chinese firms listing overseas could juice the IPO pipeline for March in HK. Authorities will be considering new overseas IPO applications from March 3rd.
  • Chinese firms including WeDoctor and Black Sesame Technologies are already reportedly considering an HK listing.
  • Citi write that the reduction in carry could tilt USD/HKD toward the 7.82 level, although domestic equity strength could add further pressure toward 7.75.
Figure 1: HKD Forward Points driven by IPO expectations, HKMA intervention

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