Data from the People’s Bank of China on Oct. 19 indicate capital inflows into the nation resumed last month after outflows in the previous two months. China’s financial institutions bought a net 130.7 billion yuan (US$21 billion) of foreign currency last month, according to the central bank’s report on yuan positions accumulated from foreign-exchange purchases.
That was the second-biggest monthly net purchase this year, data compiled by Bloomberg show.
“Given the proximity of Hong Kong to the mainland,” the recent strength in the onshore spot yuan rate has supported the Hong Kong dollar, Ji said.
Pressure on the city’s currency will probably remain, triggering more intervention, he said.
China’s economy expanded 7.4 percent from a year earlier in the third quarter, the government said Thursday. While that was the weakest pace in more than three years, industrial production, retail sales and fixed-asset investment all accelerated last month, signaling growth may be rebounding after a seven-quarter slowdown.
“As the Chinese economy is likely to have bottomed, investors want to position for the rebound and Chinese stock market valuations are cheap,” said Chris Leung, a Hong Kong- based senior economist at DBS Bank Ltd “Funds from Europe and the US are flowing into Hong Kong as well as for buying China- related stocks.”
China’s benchmark Shanghai Composite Index of stocks rose 1.1 percent in the week ending Oct. 19, the third week of gains and the longest winning stretch since April.