Riot police officers stand outside a branch of HSBC bank in Wan Chai neighbourhood in Hong Kong, China, on Aug. 11, 2019.Thomas Peter/Reuters
Unrest in Hong Kong has led to as much as US$5-billion of capital outflows from investment funds in the Asian financial hub since April, the Bank of England said, although its Hong Kong equivalent noted this did not necessarily mean the money had left the city’s banking system.
The outflows, which equate to nearly 1.25 per cent of Hong Kong’s gross domestic product, began when protests broke out against a proposal to allow extradition to mainland China. The protests led to violent clashes and retail sales plunged, pushing the city into its first recession in a decade.
“These political tensions pose risks, given Hong Kong’s position as a major financial centre,” the BoE report said.
The BoE monitors Hong Kong because British banks such as HSBC and Standard Chartered are also the leading banks in Hong Kong.
The banks have passed the BoE’s stress test, which modelled a fall of almost 8 per cent in Hong Kong’s GDP and a slump in property prices by more than half.
“According to the latest statistics on deposits and money supply, as well as the latest financial market situation, there was no noticeable outflow of funds from Hong Kong dollar or from the banking system,” a spokeswoman for the Hong Kong Monetary Authority, Hong Kong’s central bank, said in an e-mail.
The Hong Kong dollar rallied to a five-month high last week.
The spokeswoman added that the US$5-billion in the BoE’s report referred to portfolio capital changes via investment funds, which “could mean asset reallocation by or among investors and may not involve conversion of currencies, and therefore it does not necessarily lead to fund outflows from Hong Kong dollars or Hong Kong’s banking system.”