HKMA warns of rising risk Hong Kong markets may be used as proxy hedge

HONG KONG (AFX-ASIA) - There is increasing risk that Hong Kong markets may be used as a proxy hedge by investors for their investments in regional economies, Hong Kong Monetary Authority chief executive Joseph Yam said.	    Speaking to reporters, Yam said in the absence of capital controls, Hong Kong's highly liquid financial markets are sometimes used by investors as a proxy hedge for their investment in regional economies.	    In recent months, because of several unfavourable external developments, including renewed weakness in regional currencies and escalating Sino-U.S. tensions, the 12-month Hong Kong dollar forward rates have started to rise, Yam said.	    The 12-month forward rate turned from a discount to a premium in the beginning of March, and peaked at around 470 pips in early April, before coming back down to around 250 pips now, Yam said. 	    This was, however, broadly in line with the pre-crisis average of 240 pips, and far below the high of nearly 8,000 pips at the height of the Asian financial crisis, he said.	    "The monthly volatility might be huge sometimes for the 12-month forwards ... We shall continue to monitor the market situation closely," he said. 

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