Hong Kong Dollar Deposits Rise 1.3% as RMB Holdings Near RMB1T Mark

Hong Kong’s monetary base showed diverging currency preferences in January, with local dollar deposits climbing 1.3% even as foreign currency holdings retreated, according to data released by the Hong Kong Monetary Authority on February 27.

The headline number—a 0.1% dip in total deposits at authorized institutions—masks more interesting movements underneath. Foreign currency deposits dropped 1.1%, driven primarily by corporate fund flows, while renminbi deposits jumped 3.5% to reach RMB993.9 billion. That’s knocking on the door of the psychologically significant RMB1 trillion level.

Lending Activity Picks Up

Total loans and advances grew 1.1% during the month. Domestic lending (including trade finance) rose 0.7%, but the real action was in offshore-directed loans, which climbed 2.2%. The loan-to-deposit ratio for Hong Kong dollars actually tightened to 72.3% from 72.9% in December—deposits grew faster than lending demand.

Cross-border renminbi trade settlement totaled RMB1,016.4 billion in January, down from RMB1,177.4 billion in December. The pullback likely reflects typical post-year-end normalization rather than any structural shift.

Money Supply Signals

Here’s where it gets interesting for market watchers. Seasonally-adjusted Hong Kong dollar M1 surged 2.6% month-over-month and sits 16.9% higher than January 2025. The HKMA attributed this partly to “investment-related activities”—a polite way of saying money is moving into more liquid positions.

Broader measures showed steadier growth. HKD M2 and M3 both increased 1.1% monthly, up 3.8% year-over-year. Total M2 and M3 were essentially flat for January but remain roughly 9.9% above year-ago levels.

What Traders Should Watch

The Hang Seng Index (HK50) traded at 26,649 points on February 27, up 1.02% on the session. The combination of rising local currency deposits and that M1 spike suggests domestic liquidity conditions remain supportive, even as global rate uncertainty persists.

The HKMA cautioned against reading too much into single-month fluctuations, noting that seasonal funding demands and business cycles create noise in the data. Still, the renminbi deposit trend bears watching—a break above RMB1 trillion would mark a milestone for offshore yuan holdings in the city.

The authority also released separate data on Hong Kong’s foreign currency reserves and liquidity position for January, while separately announcing plans to study integrated infrastructure connecting equities, bonds, and digital assets through its CMU OmniClear platform.

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