Since the beginning of this year, the total of Hong Kong’s foreign exchange reserve assets has decreased by nearly $80 billion, a drop of 16 percent. At the same time, the aggregate balance of Hong Kong’s banking system has also fallen below the “psychological watershed” of $13 billion (HK$100 billion). All these negative data show the liquidity of the Hong Kong market has shrunk, while the Hong Kong dollar interest rate has continued to rise as a result. Some analysts say that this is putting further pressure on the property market and the economy as a whole. Other analysts say that the record high-interest rate reflects that stock market volatility will likely follow.
Drastic Drop of $80 Billion in Foreign Exchange Reserves This Year
The Hong Kong Monetary Authority (HKMA) announced on Nov. 7 that Hong Kong’s official foreign exchange reserve assets at the end of October 2022 were $417.2 billion. According to data previously released by the HKMA, at the end of December 2021, Hong Kong’s foreign exchange reserve assets totaled $496.9 billion. In other words, since the beginning of this year, Hong Kong’s total foreign exchange reserve assets have decreased by $79.7 billion (about HK$625 billion), a drop of 16 percent.The current level of total foreign exchange reserve assets has fallen close to its level at the end of December 2018 to $53.2 billion (HK$417.5 billion). Moreover, the proportion of total foreign exchange reserve assets in Hong Kong dollars, as a percentage of M3 money supply, has also dropped from about 48 percent at the end of December last year to about 41 percent today.
