Hong Kong protests led to $5 billion fund outflow: Bank of England

Hong Kong’s escalating protests this year led to about $5 billion being pulled from investments funds in the Asian financial hub, according to the Bank of England.

That’s equivalent to about 1.25% of the former British colony’s gross domestic product, the UK central bank said in its semiannual Financial Stability Report, citing its own calculations and data from Refinitiv and EPFR Global.

HSBC Holdings Plc and Standard Chartered Plc, among the biggest foreign-based lenders in Hong Kong, have said that they have seen wealthy customers in the city opening overseas bank accounts as fears have grown since pro-democracy protests began.

The trade-dependent economy has been pushed into recession this year, as the turmoil shuttered businesses and kept tourists away at a time when output was already slowing amid waning global demand. But the risk of large scale capital outflows hasn’t materialized, and local banks have reported strong profits.

Protests have also cooled lately. And as the U.S. and China reached a deal to avoid a deepening trade war, Hong Kong’s currency has posted its longest rally in five years, with foreign funds buying stocks. The city’s benchmark stock index rallied 4.5% last week, though is still the weakest this year among major global markets.

Howard Lee, a deputy chief executive at the Hong Kong Monetary Authority, said late last month that the flows in the city’s currency, which is pegged to the U.S. dollar, have been “pretty balanced.”

The most recent monthly data from the authority showed Hong Kong dollar deposits rose to HK$6.91 trillion ($887 billion) in October from HK$6.88 trillion the prior month.

The UK central bank keep a close eye events in the city because of the outsized exposure of British banks. Their current combined exposure totals about 160% of their common equity Tier 1 capital, the BOE said.