The protests in Hong Kong result in a $5 billion fund drain

The Hong Kong protests have pushed investors from around the globe to pull out nearly $5 billion in funds since April 2019, as reported by the Financial Times and the Bank of England. What is staggering is that this amount represents 1.3% of the GDP of Hong Kong. The data comes from Refinitiv, the Bank of England and EPFR Global.

The protests in Asia’s financial hub erupted after the government proposed a rather controversial extradition bill in March. After that, the city has been flooded with street violent crowds and the tension has taken a toll on the city’s economy.

The Bank of England commented that the increased political risk creates a major vulnerable spot for Hong Kong. In addition, BoE also mentioned that UK banks have very high exposure to Hong Kong, one that is equivalent to 160% of their total common equity Tier1 capital requirements.

However, as the FT reported, the economic “depression” or fallout from the political turmoil in Hong Kong was within the bounds of the stress tests of the BoE for the year.

Other banks that have huge stakes in the Hong Kong’s economy are HSBC and Standard Chartered. Both banks have not provided comment, as reported by the FT. However, the USD deposits in the city are approximately $900 billion. Hong Kong’s FX deposits are under $900 billion. According to the report of BoE, the outflow of funds occurred before the protests became violent and before it became known how hard the Hong Kong economy was hit.

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