PETALING JAYA: The net inflow of funds into regional equity markets is partly being funded by the Hong Kong dollar carry trade with liquidity coming from the offshore Chinese yuan channel in the financial hub, analysts say.
MBSB Research said the large conversions of the yuan into the Hong Kong dollar has depressed the Hong Kong interbank offered rate, thus encouraging the proliferation of Hong Kong dollar carry trade as investors borrow Hong Kong dollars, lend in US dollars and then utilise the arbitrage profit to invest in riskier assets such as regional equities.
