FXStreet (Mumbai) - Hong Kong chief executive Leung Chun-ying said on Monday that the policy of pegging the Hong Kong dollar to the US dollar has been operating well and he was not going to change it.
According to reports last week, in the months of April the Hong Kong Monetary Authority intervened into the market - the amount being USD 6.8 billion in order to maintain the peg. In 2005 the policy makers committed to limit the currency’s decline to HKD 7.85 per dollar and appreciation at HKD 7.75 per dollar
HKD in demand due to Shanghai-Hong Kong Stock Connect
The Shanghai-Hong Kong Stock Connect launched on Nov 17, 2014 allows investors, including foreigners with accounts in Hong Kong brokerages to purchase certain class of shares listed on the Shanghai Stock Exchange through the local brokers. Conversely, investors in mainland China can purchase shares listed on the Hong Kong Exchange through their local brokers.
Consequently, the Chinese investors poured money into Hong Kong to take advantage of dual-listed firms’ discount. Thus, Hong Kong’s Hang Seng Index has surged 18 percent since a trading link with Shanghai started in November.
The demand for undervalued Chinese stocks, coupled with appreciating yuan against the US dollar pushed the Hong Kong dollar higher.