The Hong Kong dollar erased early losses on Monday afternoon and ended higher, buoyed by fund flows into the territory for the initial public offering by Industrial & Commercial Bank of China.
The currency was trading at 7.7855/58 against the US dollar, off a morning's low of 7.7888 and firmer than Friday's close of 7.7875/79. The Hong Kong dollar is linked to the US dollar and is allowed to trade between 7.75 and 7.85 per US dollar.
"There was a tug-of-war between buyers and sellers," one trader said. "We've seen some US dollars selling at a high level, perhaps the demand for Hong Kong dollars related to the IPO. In the medium term, interest rate arbitrage will limit the local currency's gains." ICBC, China's top lender, aims to raise around US $19 billion through a simultaneous Hong Kong and Shanghai listing that is expected to be the world's largest stock offering.
The bank is selling 35.39 billion shares in Hong Kong in a price range of HK$2.56 to HK$3.07 each. It had already attracted orders in excess of US $150 billion from global institutional investors during marketing last week. The retail portion of ICBC's IPO, earmarked for individual investors and accounting for 5 percent of the international shares, opened on Monday ahead of a debut on October 27.
In the interbank market, the volatile overnight rate softened to 3.50 percent in late afternoon from an intraday high of 3.85 percent. The one- and two-week rates edged up on IPO fund demand. Some market players are holding on extra cash in case of heavy subscription by the closely-watched ICBC IPO, a trader said.
The one-week interbank rate was quoted at 4.08/4.10 percent versus Friday's close at 4.05/4.10 percent. The two-week rate rose to 4.23/4.25 percent, compared with 4.08/4.13 percent late on Monday. The discount on Hong Kong dollar forwards widened slightly after sporadic selling in afternoon trade said a dealer at a Japanese bank. One one-year forwards was quoted at a discount of 785/765 pips versus Friday's close of 775/755 pips.
Comments
Comments are closed.