CHINA-ECONOMY: FLIGHT OF CURRENCY
|
The South China Morning Post (May 14) reported that Regulators in Hong Kong are increasingly nervous about the accelerating pace of capital outflows from China after the collapse of trade talks, fearing a wave of financial turbulence that could jeopardize the hub's longstanding dollar peg. The Hong Kong dollar has fallen to a 33-year low and is testing the limits of the Hong Kong Monetary Authority , which has been forced to intervene twice over the last week. Net outflows from China through the Shanghai - Hong Kong pipeline jumped to a four-year high of $1.6bn on Tuesday, the largest one-day exodus since China’s exchange rate crisis in 2015. Once it reaches Hong Kong it is being recycled rapidly across the rest of the world. The moves suggest that foreign funds are rushing to extract money from Chinese equities after being caught badly off guard by the Trump Administration’s latest volley of tariffs. The Shanghai Composite index has fallen by 12pc over the last two weeks. It is one element of a complex, swirling cyclone of capital flows. Chinese companies saddled with $840bn of onshore dollar debt have also been scrambling to raise money in US currency to avert potential defaults. This has led to the biggest one-week yuan slide in almost a year, sending the closely-watched exchange rate to ¥6.88 against the dollar. The line in the sand in previous episodes of stress has been ¥6.90.
|