While Hong Kong is enduring tumultuous upheaval it has yet to see any substantial capital outflow, despite the four-month-long political maelstrom engulfing the city, which has shown no sign of easing.

Monthly statistics from the Hong Kong Monetary Authority, the city’s de-facto central bank, show that in August, an accumulated HK$111 billion (US$14.15 billion) was drawn from city banks. Deposits stood at HK$6.84 trillion, down 1.6% year-on-year, the biggest monthly drop since May 2018, but overall foreign-currency deposits picked up by 2.1%, driven mainly by a 2.7% increase in US dollar deposits, to US$653 billion.

The Monetary Authority said the decline in Hong Kong dollar deposits in August partly reflected less buoyant fundraising activities compared to July. But it stressed that fluctuations in monthly deposits were “normal” as these changes are affected by interest rate movements, the size of fundraising activities and investors’ allocation of Hong Kong dollar funds before and after fundraising.

Based on the latest data up to the first three weeks of September, Hong Kong dollar deposits recorded a slight increase.

Eddie Yue, the HKMA’s newly-installed chief executive, told reporters on his first day that capital would always flow in and out of any preeminent financial center and people should not read too much into the monthly changes.

Yue vowed that the government would defend the HK dollar-US dollar peg, which has underlined the city’s monetary policy for decades.

Singapore’s Marina Bay CBD at dusk. The affluent city-state is likely to benefit from Hong Kong’s continued chaos. Photo: Asia Times

‘Modest outflow’

Goldman Sach examined changes in total deposits in Singapore owned by foreigners and said in a report that some US$4 billion – the upper end of an estimate – had flowed from Hong Kong to Lion City, its regional rival, over the past few months.

Singaporean banks saw a 14% jump in foreign exchange deposits in August, on top of a 5% increase in deposits owned by foreign residents between June and August.

“We found modest net outflow from HKD deposits in Hong Kong and modest net inflow of FX deposits in Singapore,” analysts Gurpreet Singh Sahi and Guo Yingqiang wrote in a note to investors late on Monday.

“We believe the debate on Hong Kong outflow/liquidity will remain active and the data points for September [and beyond] critical in shaping the same.”

The consensus among analysts is that the $4-billion outflow cannot be categorized as a substantial capital flight; that would require 5% of the money pooled in Hong Kong to be sent out.

Meanwhile, Hong Kong’s Ming Pao Daily cited figures from Hong Kong’s Hang Seng Bank as saying there was an emerging trend among private banking clients to open new accounts so that they could swiftly move their assets and park them in offshore safe havens like Singapore, should the civil strife in Hong Kong get worse.

But the paper said there was no noticeable spike in capital outflows from Hang Seng’s local office to its branch in Singapore.