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Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on October 29
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The following is issued on behalf of the Hong Kong Monetary Authority:

(Approved for Issue by the Exchange Fund Advisory Committee on November 30, 2015)

Report on the Currency Board Operations (June 19 to October 9, 2015)
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     The Currency Board Sub-Committee noted that during the review period, the Hong Kong dollar traded within a narrow range of 7.7500 to 7.7562 against the US dollar.  The Hong Kong dollar interbank interest rates remained at low levels. The strong-side Convertibility Undertaking (CU) was triggered intermittently since September 2015, mainly due to conversions into the Hong Kong dollar from the offshore Renminbi and some ordinary business demands for the Hong Kong dollar.  As a result, the Aggregate Balance expanded to HK$361.48 billion and the Monetary Base increased to HK$1,500.65 billion.

     The Sub-Committee noted that, in accordance with Currency Board principles, changes in the Monetary Base had been fully matched by corresponding changes in foreign reserves.

     The Report on Currency Board Operations for the period under review is at the Annex.

Monitoring of Risks and Vulnerabilities
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     The Sub-Committee noted that during the review period, the global financial markets had witnessed sharp sell-offs on worries about waning global growth.

     The Sub-Committee noted that in the US, the September employment report had posed uncertainties to the underlying strength of the economic recovery and pushed back market expectations of US interest rate lift-off.

     The Sub-Committee noted that the emerging market economies were under pressure amid upcoming US interest rate normalisation, strong US dollar, weak commodity prices and slowdown in major export markets.

     The Sub-Committee noted that in Mainland China, growth continued to ease but systemic financial risks remained contained.  The RMB exchange rate had shown signs of stabilisation recently after the refinement to the exchange rate fixing mechanism in August.

     The Sub-Committee noted that in Hong Kong, growth moderated amid flimsy global growth prospects, softer inbound tourism and weaker consumer and business sentiment.  Property market sentiment also showed signs of weakening.

Assessing Sovereign Risk of Emerging Market Economies
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     The Sub-Committee noted an assessment of the likelihood of sharp increases in the sovereign credit risks of selected emerging market economies and its relationship with global and domestic risk factors, against the backdrop of upcoming US interest rate hikes and exit from ultra-loose monetary conditions.

Ends/Wednesday, December 9, 2015
Issued at HKT 18:30

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