Hong Kong can weather attacks on the city's currency because of its large foreign exchange reserves and assets, Secretary for Financial Services and the Treasury KC Chan said on Thursday. "Those who worry about effects of attacks on the peg on the Hong Kong economy do not understand the situation," Chan said at a ceremony at the Hong Kong Stock Exchange to mark the first trading day after the Chinese Lunar New Year holiday.
"The foreign reserves and assets we have today far exceed the last time the peg was attacked." Hong Kong's 35-year old currency peg to the US dollar has been under pressure since the beginning of the year because of the city's close economic ties to China following a selloff in the yuan this year. The Hong Kong dollar is pegged in a 7.75-to-7.85 band against the US dollar. Separately, Chan said a proposed trading link between the Hong Kong and Shenzhen stock markets would be launched when the market is "stable", but did not give any specific timeframe.
Speaking at the same ceremony, the Chairman of Hong Kong Exchanges and Clearing, Chow Chung-kong, said despite continuing market volatility, he believed the Shenzhen Stock Connect scheme could still be launched this year. The Shenzhen scheme was meant to follow on the heels of a landmark trading scheme between Hong Kong and Shanghai that launched in late 2014, which allowed foreign investors direct access to mainland listed stocks. But investor participation has been subdued due to regulatory uncertainty, risk of yuan depreciation, and anxiety about the heavy-handed regulatory response to the stock crash.