KONTAN.CO.ID - HONG KONG. Local currency deposits in Hong Kong shrank the most month-on-month in over a year in August while U.S. dollar deposits ballooned, official data showed on Monday. Hong Kong dollar deposits declined by 1.6% last month, the steepest monthly fall since May 2018, while U.S. dollar deposits grew by the most since December 2018 at a rate of 2.7%, according to Refinitiv Datastream. The city's economy and financial markets have been under pressure amid escalations in local political unrest and the U.S.-China trade war in recent months.
But central bank Hong Kong Monetary Authority (HKMA)attributed the drop to "less buoyant fund-raising activities during the month compared to July," noting that "a wide range of factors" including interest rate movements could influence deposit compositions. "Fluctuations in monthly deposit changes are therefore normal," the central bank said in the press release. Read Also: What delisting Chinese firms from U.S. stock markets could mean Carie Li, economist at OCBC Wing Hang Bank, said fears of capital outflows amid escalating protests in August may have sent flows from Hong Kong dollar deposits to foreign currency ones, but that could reverse as markets calmed in September. "Overall this was not a huge change. We shouldn't read too much into one month's data," she said. Deposits denominated in the local currency grew 1.8% year-on-year, decelerating from the 3.4% expansion in July. U.S. dollar deposits added 9.4% from a year earlier, up from 8.4% growth in July, according to Refinitiv Datastream. HKMA said the uptick in U.S. dollar deposits was driven by a "transfer of funds resulting in a higher amount of foreign-currency deposits placed by the Exchange Fund," which backs Hong Kong's currency peg with the greenback.