HK a safe haven amid Asia currency woes
Australian Financial Review July 15/97
By Rowan Callick, Hong Kong
The ill wind of speculation blowing through South-East
Asian currencies is doing some good to Hong Kong.
The Hang Seng sharemarket index, which had been
floundering since the July 1 handover to China, burst
back into life last Friday, substantially as a safe haven for
money committed to the Asian region but anxious about
its security in South-East Asian States triggered by the
Thai baht taking a hit last week.
Yesterday, the Hang Seng soared again, reaching a new
record, as the Philippines' peso also came under extreme
pressure.
Hong Kong's dollar is pegged to the $US, at about
$HK7.8 to $US1. The spurt on Wall Street on Friday,
and the release of June figures showing US wholesale
prices coming down to reinforce America's low-inflation,
low-interest regime, further reinforced positive sentiments
in Hong Kong.
Mr Joseph Yam, chief executive of the Hong Kong
Monetary Authority -- the world's best-paid central
banker, at about $1.2 million a year -- said yesterday he
was not concerned about the prospect of speculation
against the $HK.
He said: "Basic economic fundamentals support a stable
currency, and that's what you're seeing in Hong Kong."
This special administrative region of China holds about
$100 billion official reserves, and its interest rates remain
at the same level as those in the United States.
Mr Yam told the Asian Debt Conference in Hong Kong:
"Stability of the Thai economy and its currency has been
adversely affected by an over-reliance on short-term
foreign borrowing for investment activities, and the
over-extension of property-related lending. Had there
been a mature debt market, the reliance on short-term
foreign capital, which is inherently volatile, would have
been reduced."
In Hong Kong, savings will be further institutionalised by
the implementation of the Mandatory Provident Fund, on
similar government-legislated, privately-managed lines to
the Australian pension scheme introduced by Mr Paul
Keating.
Liquidity was a problem in the Asian region, Mr Yam
said, because its markets were fragmented. He proposed
"more effective financial intermediation on an international
basis", facilitated by a platform to help cross-border
trades in debt securities within Asia.
The region's central banks were already discussing such a
scheme, starting with bilateral links as "the pragmatic way
forward", he said.
The monetary authority had agreed in principle to
establish a bilateral repurchase pact between its Central
Money-market Units and the Reserve Bank of Australia's
Information and Transfer System. |
