Who gets paid for a useful city?
Hong Kong gets discussed in lazy binaries. It is either finished because the old expat-finance version is fading, or it is back because shares rally, listings reopen and restaurants feel busy again. The better question is whether the city still performs a function other places cannot easily replace. For investors, there is a second question: who gets paid for it?
The city can remain useful while some Hong Kong assets remain poor investments. Exchanges, banks and custodians can earn income directly from financial activity. Landlords benefit only when that activity turns into employment, occupied space and rents. Those links need to be demonstrated rather than bundled into a general claim that Hong Kong is back.
Between systems that still need each other
Hong Kong’s old growth story assumed China and global capital would keep moving closer together. Chinese companies wanted offshore funding, foreign investors wanted access, and the city reduced the friction. Its deeper function was to sit between systems that needed each other but did not fully trust each other. That function could outlast the optimism that once surrounded it.
Partial openness creates work, but declining trust is not automatically good for the intermediary. Arranging funding, settling payments and making contracts usable across borders can become more valuable as transactions become harder. But total business can shrink, and confidence in the intermediary can deteriorate too. Hong Kong needs to remain close enough to China to be useful, distinct enough for international counterparties to accept and trusted enough by Beijing to retain its role.
The strongest bearish case is that this balance erodes. Legal history and financial infrastructure cannot compensate indefinitely if participants lose confidence in enforceability, market access or their ability to move money. Complete financial separation would also leave fewer transactions to intermediate. The opportunity lies in a world that remains connected, but less comfortably.
The work lives at the boundary.
Scroll the diagram sideways to inspect its labels.
Follow the explanation as you scroll, or select a function.
Capital formation
Listings and access channels connect an issuer with capital it could not reach in quite the same way on its own. Exchanges, brokers and advisers can earn fees before any landlord sees a new tenant. The condition: counterparties must still trust the channel, the rules and their ability to move money.
Payments and settlement
Offshore RMB payments and settlement infrastructure reduce the friction of doing business across currencies and jurisdictions. Activity is useful evidence of a role; it is not a measure of every participant’s margin. The limit: more offshore RMB activity does not automatically produce more cheap Hong Kong-dollar funding.
Custody and currency risk
Custody, asset servicing and hedging let investors hold exposure while managing operational and currency risks. The value comes from usable institutions, not simply geographic proximity. The bearish case: weaker enforceability or restrictions on access can erode the service being sold.
One region. Different reasons to spend.
Hong Kong is changing in ways that are easier to notice on a weekend than in an annual report. Residents head to Shenzhen for food, spas and what they see as better value or more attentive service; Hong Kong’s restaurant service can be rather direct. Yet SoHo can still fill up on the right nights. These are local observations, not a representative spending survey, but they suggest a better question than which city is winning.
A resident can choose Shenzhen for one purchase and Hong Kong for another. A cheaper day out across the border does not mean the city has lost every reason to attract people. It does mean local operators have to compete harder for discretionary spending. The investment consequence is uneven: a busy district, a weak mall and a successful financial intermediary can all exist in the same city.
A train ride can change the price and service a household expects. That challenges operators who used to rely on convenience alone.
City-level nostalgia tells us little about an individual rent roll. Follow the customer, the margin and the lease—not just the crowd.
A function you can measure
There is evidence that the financial function survives. Hong Kong’s authorities report that it handles over 70% of global offshore RMB payments on SWIFT. Outstanding RMB loans reached RMB935 billion in 2025, up 29%, while Northbound Bond Connect accounted for around 61% of foreign investors’ turnover in China’s interbank bond market. These are different measures of infrastructure being used, not interchangeable measures of recovery.[1][2]
The figures also limit the argument. Bond Connect’s average daily turnover rose over several years but fell from RMB41.7 billion in 2024 to RMB39.0 billion in 2025. Leadership in China-related finance does not establish that every part of the old international franchise is returning. A narrower role can be durable without deserving its old growth assumptions or valuation multiples.[2]
The channel grew. Not every year did.
Scroll the chart sideways to inspect all eight years.
Data and definitions
| Year | Average daily turnover (RMB bn) |
|---|---|
| 2018 | 3.6 |
| 2019 | 10.6 |
| 2020 | 19.3 |
| 2021 | 25.8 |
| 2022 | 32.2 |
| 2023 | 40.1 |
| 2024 | 41.7 |
| 2025 | 39.0 |
Inside the peg, a different funding cycle
HIBOR tells us about funding relief, not the whole future of Hong Kong. The dollar peg anchors the monetary system, but local demand and supply can move Hong Kong funding rates away from US rates for a time. Lower rates can reflect abundant liquidity, weak borrowing demand or both. Offshore RMB activity is evidence of another financial function; it does not automatically produce cheap HKD funding.
The 2025 episode showed both sides of that mechanism. The HKMA injected HK$129.4 billion through strong-side operations in early May. Abundant HKD liquidity pushed interbank rates down, and the wider rate gap encouraged carry trades selling HKD for USD. Weak-side operations between late June and mid-August subsequently withdrew HK$119.9 billion. Cheap funding was real; its persistence was a separate question.[3][4]
The historical chart shows the divergence without pretending the two rates are identical instruments. It uses all 242 published observations in HSBC’s 2025 one-month HKD archive against the Fed’s overnight target range. HSBC explicitly distinguishes its own quote from the HKAB fixing. The gap to the Fed midpoint is useful context, not a matched-tenor spread or a trade available without currency and funding risk.[5][6]
A full year of local funding divergence.
━ HSBC one-month HKD quote▰ Fed overnight target range
Scroll the chart sideways to inspect its labels.
Inspect all observations and calculation
Gap (basis points) = 100 × [HSBC quote (%) − (Fed upper + lower)/2]. Target changes use their effective dates. All dates are in 2025.
| Date | HSBC 1m (%) | Fed range (%) | Gap (bp) |
|---|---|---|---|
| 2025-01-02 | 4.20 | 4.25–4.50 | -17.5 |
| 2025-01-03 | 4.10 | 4.25–4.50 | -27.5 |
| 2025-01-06 | 4.11 | 4.25–4.50 | -26.5 |
| 2025-01-07 | 4.16 | 4.25–4.50 | -21.5 |
| 2025-01-08 | 4.15 | 4.25–4.50 | -22.5 |
| 2025-01-09 | 4.10 | 4.25–4.50 | -27.5 |
| 2025-01-10 | 4.05 | 4.25–4.50 | -32.5 |
| 2025-01-13 | 4.00 | 4.25–4.50 | -37.5 |
| 2025-01-14 | 3.96 | 4.25–4.50 | -41.5 |
| 2025-01-15 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-01-16 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-01-17 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-01-20 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-01-21 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-01-22 | 3.87 | 4.25–4.50 | -50.5 |
| 2025-01-23 | 3.75 | 4.25–4.50 | -62.5 |
| 2025-01-24 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-01-27 | 3.83 | 4.25–4.50 | -54.5 |
| 2025-01-28 | 3.81 | 4.25–4.50 | -56.5 |
| 2025-02-03 | 3.70 | 4.25–4.50 | -67.5 |
| 2025-02-04 | 3.68 | 4.25–4.50 | -69.5 |
| 2025-02-05 | 3.68 | 4.25–4.50 | -69.5 |
| 2025-02-06 | 3.77 | 4.25–4.50 | -60.5 |
| 2025-02-07 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-02-10 | 3.75 | 4.25–4.50 | -62.5 |
| 2025-02-11 | 3.73 | 4.25–4.50 | -64.5 |
| 2025-02-12 | 3.60 | 4.25–4.50 | -77.5 |
| 2025-02-13 | 3.65 | 4.25–4.50 | -72.5 |
| 2025-02-14 | 3.68 | 4.25–4.50 | -69.5 |
| 2025-02-17 | 3.87 | 4.25–4.50 | -50.5 |
| 2025-02-18 | 3.95 | 4.25–4.50 | -42.5 |
| 2025-02-19 | 4.05 | 4.25–4.50 | -32.5 |
| 2025-02-20 | 4.05 | 4.25–4.50 | -32.5 |
| 2025-02-21 | 4.00 | 4.25–4.50 | -37.5 |
| 2025-02-24 | 4.05 | 4.25–4.50 | -32.5 |
| 2025-02-25 | 3.85 | 4.25–4.50 | -52.5 |
| 2025-02-26 | 4.00 | 4.25–4.50 | -37.5 |
| 2025-02-27 | 3.98 | 4.25–4.50 | -39.5 |
| 2025-02-28 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-03-03 | 3.86 | 4.25–4.50 | -51.5 |
| 2025-03-04 | 3.86 | 4.25–4.50 | -51.5 |
| 2025-03-05 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-06 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-07 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-10 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-11 | 3.90 | 4.25–4.50 | -47.5 |
| 2025-03-12 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-13 | 3.70 | 4.25–4.50 | -67.5 |
| 2025-03-14 | 3.70 | 4.25–4.50 | -67.5 |
| 2025-03-17 | 3.70 | 4.25–4.50 | -67.5 |
| 2025-03-18 | 3.77 | 4.25–4.50 | -60.5 |
| 2025-03-19 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-20 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-21 | 3.83 | 4.25–4.50 | -54.5 |
| 2025-03-24 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-25 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-26 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-27 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-03-28 | 3.72 | 4.25–4.50 | -65.5 |
| 2025-03-31 | 3.72 | 4.25–4.50 | -65.5 |
| 2025-04-01 | 3.55 | 4.25–4.50 | -82.5 |
| 2025-04-02 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-03 | 3.40 | 4.25–4.50 | -97.5 |
| 2025-04-07 | 3.44 | 4.25–4.50 | -93.5 |
| 2025-04-08 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-09 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-10 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-11 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-14 | 3.60 | 4.25–4.50 | -77.5 |
| 2025-04-15 | 3.60 | 4.25–4.50 | -77.5 |
| 2025-04-16 | 3.50 | 4.25–4.50 | -87.5 |
| 2025-04-17 | 3.57 | 4.25–4.50 | -80.5 |
| 2025-04-22 | 3.60 | 4.25–4.50 | -77.5 |
| 2025-04-23 | 3.70 | 4.25–4.50 | -67.5 |
| 2025-04-24 | 3.77 | 4.25–4.50 | -60.5 |
| 2025-04-25 | 3.80 | 4.25–4.50 | -57.5 |
| 2025-04-28 | 4.03 | 4.25–4.50 | -34.5 |
| 2025-04-29 | 4.06 | 4.25–4.50 | -31.5 |
| 2025-04-30 | 3.95 | 4.25–4.50 | -42.5 |
| 2025-05-02 | 3.98 | 4.25–4.50 | -39.5 |
| 2025-05-06 | 3.68 | 4.25–4.50 | -69.5 |
| 2025-05-07 | 3.10 | 4.25–4.50 | -127.5 |
| 2025-05-08 | 2.15 | 4.25–4.50 | -222.5 |
| 2025-05-09 | 1.90 | 4.25–4.50 | -247.5 |
| 2025-05-12 | 1.89 | 4.25–4.50 | -248.5 |
| 2025-05-13 | 1.58 | 4.25–4.50 | -279.5 |
| 2025-05-14 | 1.37 | 4.25–4.50 | -300.5 |
| 2025-05-15 | 1.32 | 4.25–4.50 | -305.5 |
| 2025-05-16 | 1.33 | 4.25–4.50 | -304.5 |
| 2025-05-19 | 1.20 | 4.25–4.50 | -317.5 |
| 2025-05-20 | 1.01 | 4.25–4.50 | -336.5 |
| 2025-05-21 | 0.73 | 4.25–4.50 | -364.5 |
| 2025-05-22 | 0.65 | 4.25–4.50 | -372.5 |
| 2025-05-23 | 0.60 | 4.25–4.50 | -377.5 |
| 2025-05-26 | 0.56 | 4.25–4.50 | -381.5 |
| 2025-05-27 | 0.60 | 4.25–4.50 | -377.5 |
| 2025-05-28 | 0.60 | 4.25–4.50 | -377.5 |
| 2025-05-29 | 0.57 | 4.25–4.50 | -380.5 |
| 2025-05-30 | 0.56 | 4.25–4.50 | -381.5 |
| 2025-06-02 | 0.90 | 4.25–4.50 | -347.5 |
| 2025-06-03 | 0.85 | 4.25–4.50 | -352.5 |
| 2025-06-04 | 0.79 | 4.25–4.50 | -358.5 |
| 2025-06-05 | 0.70 | 4.25–4.50 | -367.5 |
| 2025-06-06 | 0.64 | 4.25–4.50 | -373.5 |
| 2025-06-09 | 0.58 | 4.25–4.50 | -379.5 |
| 2025-06-10 | 0.55 | 4.25–4.50 | -382.5 |
| 2025-06-11 | 0.62 | 4.25–4.50 | -375.5 |
| 2025-06-12 | 0.64 | 4.25–4.50 | -373.5 |
| 2025-06-13 | 0.60 | 4.25–4.50 | -377.5 |
| 2025-06-16 | 0.54 | 4.25–4.50 | -383.5 |
| 2025-06-17 | 0.50 | 4.25–4.50 | -387.5 |
| 2025-06-18 | 0.50 | 4.25–4.50 | -387.5 |
| 2025-06-19 | 0.53 | 4.25–4.50 | -384.5 |
| 2025-06-20 | 0.53 | 4.25–4.50 | -384.5 |
| 2025-06-23 | 0.66 | 4.25–4.50 | -371.5 |
| 2025-06-24 | 0.74 | 4.25–4.50 | -363.5 |
| 2025-06-25 | 0.91 | 4.25–4.50 | -346.5 |
| 2025-06-26 | 0.96 | 4.25–4.50 | -341.5 |
| 2025-06-27 | 0.84 | 4.25–4.50 | -353.5 |
| 2025-06-30 | 0.73 | 4.25–4.50 | -364.5 |
| 2025-07-02 | 0.75 | 4.25–4.50 | -362.5 |
| 2025-07-03 | 0.72 | 4.25–4.50 | -365.5 |
| 2025-07-04 | 0.86 | 4.25–4.50 | -351.5 |
| 2025-07-07 | 1.00 | 4.25–4.50 | -337.5 |
| 2025-07-08 | 1.05 | 4.25–4.50 | -332.5 |
| 2025-07-09 | 1.10 | 4.25–4.50 | -327.5 |
| 2025-07-10 | 1.06 | 4.25–4.50 | -331.5 |
| 2025-07-11 | 1.00 | 4.25–4.50 | -337.5 |
| 2025-07-14 | 1.14 | 4.25–4.50 | -323.5 |
| 2025-07-15 | 1.16 | 4.25–4.50 | -321.5 |
| 2025-07-16 | 1.18 | 4.25–4.50 | -319.5 |
| 2025-07-17 | 1.18 | 4.25–4.50 | -319.5 |
| 2025-07-18 | 1.10 | 4.25–4.50 | -327.5 |
| 2025-07-21 | 0.90 | 4.25–4.50 | -347.5 |
| 2025-07-22 | 0.93 | 4.25–4.50 | -344.5 |
| 2025-07-23 | 0.94 | 4.25–4.50 | -343.5 |
| 2025-07-24 | 0.90 | 4.25–4.50 | -347.5 |
| 2025-07-25 | 0.92 | 4.25–4.50 | -345.5 |
| 2025-07-28 | 1.00 | 4.25–4.50 | -337.5 |
| 2025-07-29 | 1.02 | 4.25–4.50 | -335.5 |
| 2025-07-30 | 1.03 | 4.25–4.50 | -334.5 |
| 2025-07-31 | 1.03 | 4.25–4.50 | -334.5 |
| 2025-08-01 | 1.00 | 4.25–4.50 | -337.5 |
| 2025-08-04 | 0.94 | 4.25–4.50 | -343.5 |
| 2025-08-06 | 0.88 | 4.25–4.50 | -349.5 |
| 2025-08-07 | 0.95 | 4.25–4.50 | -342.5 |
| 2025-08-08 | 0.95 | 4.25–4.50 | -342.5 |
| 2025-08-11 | 0.95 | 4.25–4.50 | -342.5 |
| 2025-08-12 | 0.85 | 4.25–4.50 | -352.5 |
| 2025-08-13 | 0.90 | 4.25–4.50 | -347.5 |
| 2025-08-15 | 1.30 | 4.25–4.50 | -307.5 |
| 2025-08-18 | 2.04 | 4.25–4.50 | -233.5 |
| 2025-08-19 | 2.55 | 4.25–4.50 | -182.5 |
| 2025-08-20 | 2.85 | 4.25–4.50 | -152.5 |
| 2025-08-21 | 2.85 | 4.25–4.50 | -152.5 |
| 2025-08-22 | 2.78 | 4.25–4.50 | -159.5 |
| 2025-08-25 | 2.70 | 4.25–4.50 | -167.5 |
| 2025-08-26 | 2.80 | 4.25–4.50 | -157.5 |
| 2025-08-27 | 3.20 | 4.25–4.50 | -117.5 |
| 2025-08-28 | 3.32 | 4.25–4.50 | -105.5 |
| 2025-08-29 | 3.25 | 4.25–4.50 | -112.5 |
| 2025-09-01 | 3.15 | 4.25–4.50 | -122.5 |
| 2025-09-02 | 3.05 | 4.25–4.50 | -132.5 |
| 2025-09-03 | 2.86 | 4.25–4.50 | -151.5 |
| 2025-09-04 | 2.93 | 4.25–4.50 | -144.5 |
| 2025-09-05 | 3.00 | 4.25–4.50 | -137.5 |
| 2025-09-09 | 3.00 | 4.25–4.50 | -137.5 |
| 2025-09-10 | 3.06 | 4.25–4.50 | -131.5 |
| 2025-09-11 | 3.03 | 4.25–4.50 | -134.5 |
| 2025-09-12 | 3.05 | 4.25–4.50 | -132.5 |
| 2025-09-15 | 3.19 | 4.25–4.50 | -118.5 |
| 2025-09-16 | 3.21 | 4.25–4.50 | -116.5 |
| 2025-09-17 | 3.20 | 4.25–4.50 | -117.5 |
| 2025-09-18 | 3.30 | 4.00–4.25 | -82.5 |
| 2025-09-19 | 3.43 | 4.00–4.25 | -69.5 |
| 2025-09-22 | 3.64 | 4.00–4.25 | -48.5 |
| 2025-09-23 | 3.92 | 4.00–4.25 | -20.5 |
| 2025-09-25 | 3.63 | 4.00–4.25 | -49.5 |
| 2025-09-26 | 3.61 | 4.00–4.25 | -51.5 |
| 2025-09-29 | 3.59 | 4.00–4.25 | -53.5 |
| 2025-09-30 | 3.53 | 4.00–4.25 | -59.5 |
| 2025-10-02 | 3.50 | 4.00–4.25 | -62.5 |
| 2025-10-03 | 3.53 | 4.00–4.25 | -59.5 |
| 2025-10-06 | 3.58 | 4.00–4.25 | -54.5 |
| 2025-10-08 | 3.54 | 4.00–4.25 | -58.5 |
| 2025-10-09 | 3.45 | 4.00–4.25 | -67.5 |
| 2025-10-10 | 3.51 | 4.00–4.25 | -61.5 |
| 2025-10-13 | 3.44 | 4.00–4.25 | -68.5 |
| 2025-10-14 | 3.50 | 4.00–4.25 | -62.5 |
| 2025-10-15 | 3.43 | 4.00–4.25 | -69.5 |
| 2025-10-16 | 3.45 | 4.00–4.25 | -67.5 |
| 2025-10-17 | 3.53 | 4.00–4.25 | -59.5 |
| 2025-10-20 | 3.58 | 4.00–4.25 | -54.5 |
| 2025-10-21 | 3.67 | 4.00–4.25 | -45.5 |
| 2025-10-22 | 3.50 | 4.00–4.25 | -62.5 |
| 2025-10-23 | 3.54 | 4.00–4.25 | -58.5 |
| 2025-10-24 | 3.46 | 4.00–4.25 | -66.5 |
| 2025-10-27 | 3.51 | 4.00–4.25 | -61.5 |
| 2025-10-28 | 3.46 | 4.00–4.25 | -66.5 |
| 2025-10-30 | 3.41 | 3.75–4.00 | -46.5 |
| 2025-10-31 | 3.43 | 3.75–4.00 | -44.5 |
| 2025-11-03 | 3.30 | 3.75–4.00 | -57.5 |
| 2025-11-04 | 3.32 | 3.75–4.00 | -55.5 |
| 2025-11-05 | 3.15 | 3.75–4.00 | -72.5 |
| 2025-11-06 | 3.13 | 3.75–4.00 | -74.5 |
| 2025-11-07 | 3.00 | 3.75–4.00 | -87.5 |
| 2025-11-10 | 3.02 | 3.75–4.00 | -85.5 |
| 2025-11-11 | 3.02 | 3.75–4.00 | -85.5 |
| 2025-11-12 | 3.10 | 3.75–4.00 | -77.5 |
| 2025-11-13 | 3.08 | 3.75–4.00 | -79.5 |
| 2025-11-14 | 3.07 | 3.75–4.00 | -80.5 |
| 2025-11-17 | 3.00 | 3.75–4.00 | -87.5 |
| 2025-11-18 | 2.92 | 3.75–4.00 | -95.5 |
| 2025-11-19 | 2.30 | 3.75–4.00 | -157.5 |
| 2025-11-20 | 2.38 | 3.75–4.00 | -149.5 |
| 2025-11-21 | 2.50 | 3.75–4.00 | -137.5 |
| 2025-11-24 | 2.63 | 3.75–4.00 | -124.5 |
| 2025-11-25 | 2.79 | 3.75–4.00 | -108.5 |
| 2025-11-26 | 2.99 | 3.75–4.00 | -88.5 |
| 2025-11-27 | 3.24 | 3.75–4.00 | -63.5 |
| 2025-11-28 | 3.17 | 3.75–4.00 | -70.5 |
| 2025-12-01 | 2.94 | 3.75–4.00 | -93.5 |
| 2025-12-02 | 2.80 | 3.75–4.00 | -107.5 |
| 2025-12-03 | 2.88 | 3.75–4.00 | -99.5 |
| 2025-12-04 | 3.03 | 3.75–4.00 | -84.5 |
| 2025-12-05 | 3.05 | 3.75–4.00 | -82.5 |
| 2025-12-08 | 3.09 | 3.75–4.00 | -78.5 |
| 2025-12-09 | 3.13 | 3.75–4.00 | -74.5 |
| 2025-12-10 | 3.11 | 3.75–4.00 | -76.5 |
| 2025-12-11 | 3.13 | 3.50–3.75 | -49.5 |
| 2025-12-12 | 3.04 | 3.50–3.75 | -58.5 |
| 2025-12-15 | 2.97 | 3.50–3.75 | -65.5 |
| 2025-12-16 | 3.13 | 3.50–3.75 | -49.5 |
| 2025-12-17 | 3.25 | 3.50–3.75 | -37.5 |
| 2025-12-18 | 3.18 | 3.50–3.75 | -44.5 |
| 2025-12-19 | 3.17 | 3.50–3.75 | -45.5 |
| 2025-12-22 | 3.12 | 3.50–3.75 | -50.5 |
| 2025-12-23 | 3.10 | 3.50–3.75 | -52.5 |
| 2025-12-24 | 3.28 | 3.50–3.75 | -34.5 |
| 2025-12-29 | 3.34 | 3.50–3.75 | -28.5 |
| 2025-12-30 | 3.20 | 3.50–3.75 | -42.5 |
| 2025-12-31 | 3.07 | 3.50–3.75 | -55.5 |
The mechanism can run in both directions
Strong side / HK$7.75 per US$
The HKMA adds HKD liquidity. It buys US dollars and sells Hong Kong dollars. More interbank HKD liquidity can put downward pressure on HIBOR. In early May 2025, those operations totalled HK$129.4bn.
Rate differential / incentives
Cheaper HKD can encourage selling it. The wider negative HKD–USD rate gap encourages carry activity that sells HKD for USD. The exchange rate can move toward the weak side. This is a feedback, not free money without currency risk.
Weak side / HK$7.85 per US$
The HKMA withdraws HKD liquidity. It sells US dollars and buys Hong Kong dollars. Interbank balances contract, reducing the conditions that made HKD funding so cheap. HK$119.9bn was withdrawn from late June to mid-August 2025.
The sequence explains the 2025 episode; it does not imply every capital inflow has the same cause. The Aggregate Balance is not all bank deposits. Sources: HKMA. [3] [4]
Three clocks. One investment.
Property is where funding relief and operating repair can run on different timetables. The rate clock asks when lower costs actually reach the borrower: debt currencies, hedges, fixed-rate borrowing and reset dates all matter. The operating clock asks whether rents, occupancy and cash generation are stabilising. New leasing can improve while old leases reset lower, so a better direction does not mean the lost income has returned.
The balance-sheet clock decides how long the company can wait. Cash, committed facilities, debt maturities and spending obligations determine whether it can reach recovery without forced sales or diluting shareholders. The question is whether financing relief arrives soon enough, and in sufficient size, to offset operating pressure before the balance sheet demands action. The timing exercise below isolates that sequence; it does not calculate a fair value.
Rate clock
Check the debt currency, hedging, reset dates and lender margins. A floating-rate loan can benefit quickly; fixed-rate or hedged debt may not. Timing and the size of the saving both matter.
Operating clock
Check new rents against expiring rents, tenant retention, occupancy and cash collection. New leasing can improve while the rent roll still falls. Repair means the sustainable cash flow has stabilised.
Balance-sheet clock
Check cash, committed facilities, maturity dates and investment commitments together. Borrowing headroom buys options, but it is neither cash already owned nor proof the asset earns an adequate return.
Does recovery arrive before the obligation?
Scroll the timeline sideways to inspect its labels.
Eight months between both relief dates and the maturity.
The sequence gives the thesis time to work. The next question is magnitude: do the actual cash receipts cover debt, investment needs and other obligations? Timing alone cannot answer that.
How the sequence can fail
Debt arrives first: funding M10, operations M17, maturity M7. The business needs committed financing or another source of cash before either recovery date. A long-run story does not pay the near-term maturity.
Rents lag: funding M3, operations M22, maturity M12. Cheaper debt arrives first, but income stabilises after the maturity. The balance sheet has to bridge the operating gap; the rate cut alone does not settle the investment.
Operating repair can also arrive before the financing benefit. If rate relief arrives at or after maturity, check whether operating receipts, existing cash and facilities cover the obligation without relying on cheaper refinancing.
Time has value. It is not a valuation.
Swire Properties illustrates why the three clocks need separate readings. Its June 2026 disclosures showed a weighted average gross debt cost of 3.3%, against 3.6% a year earlier. Attributable Hong Kong office rental income was broadly flat versus the first half of 2025, while attributable retail rental income rose 3%. Cheaper funding and uneven operating progress can therefore appear in the same results.[7]
The near-term liquidity cushion is real, but it is not surplus cash for shareholders. At June-end Swire reported HK$9.424 billion of cash and short-term deposits, HK$10.339 billion of undrawn committed facilities and HK$5.781 billion of loans and bonds due within a year. Facilities are borrowing capacity, not cash already owned. A further HK$17.584 billion was due in one to two years, while investment commitments and other obligations also compete for funding.[7]
Liquidity can buy time for repair without establishing that the shares are cheap. These figures say something about financing flexibility, not the price one should pay. A valuation still needs sustainable income, necessary capital expenditure and an assessment of what remains after debt and any dilution. The useful question is what the balance sheet allows management to do while operations recover.
These two rental-income changes do not establish the future path of net income, reinvestment or dividends. This is not a full liquidity stress test: spending, taxes, distributions and facility conditions matter.
Near-term flexibility is not surplus cash.
| Measure | Reported value | Definition / period |
|---|---|---|
| Gross debt cost | 3.3% vs 3.6% | June 2026 vs June 2025 |
| HK office rental income | Broadly flat | Attributable, H1 2026 / H1 2025 |
| HK retail rental income | +3% | Attributable, H1 2026 / H1 2025 |
| Cash + short-term deposits | HK$9.424bn | At 30 June 2026 |
| Undrawn committed facilities | HK$10.339bn | Not cash already owned |
| Loans/bonds due <1 year | HK$5.781bn | Maturity ladder; excludes other obligations |
| Due 1–2 years | HK$17.584bn | At 30 June 2026 |
| Due 2–5 years | HK$20.517bn | At 30 June 2026 |
| Due after 5 years | HK$5.339bn | At 30 June 2026 |
A city thesis is not a buy order.
A large discount to reported net asset value settles neither fear nor impairment. Fear can push the price below conservative economic value; impairment reduces that value. The same asset can contain both. Appraisals may assume rents that will not return, and a high dividend yield offers little protection if distributions depend on borrowing or asset sales.
The task is to rebuild value from the cash flows the asset can sustain. Use realistic rents and occupancy, necessary capital spending and financing costs, then ask whether the purchase price still leaves room for disappointment. That also means distinguishing bonds from shares. A company can have enough cash to repay creditors without leaving an attractive return for existing shareholders.
Credit markets can help test the recovery, but they cannot certify it. For the same issuer, successful refinancing and improving spreads relative to comparable borrowers are more useful confirmation than an equity rally alone. Bonds and shares can also rise together because broad risk appetite improves. Agreement between them is evidence to investigate, not proof that the underlying income has repaired.
What I would watch
I would become more constructive as financial participation broadens and funding relief reaches sustainable cash flow. The thesis weakens if channels become less usable or confidence in the institutions deteriorates. The property case fails where lasting income losses outweigh financing relief, or refinancing consumes the upside before shareholders receive it. Even a sound business can be a poor purchase if the price already assumes a full recovery.
Does the function survive?
What supports it
Continued use of cross-border channels, broader participation and enforceable access.
What weakens it
Channels narrow, market access becomes less usable or confidence in the intermediary erodes.
Does usefulness reach this asset?
What supports it
Evidence of fee income, tenants, rents or operating cash—not just a city narrative.
What weakens it
The activity benefits intermediaries but never reaches the business or property being bought.
Can the balance sheet wait?
What supports it
Cash, facilities and operating receipts cover obligations through the recovery period.
What weakens it
Refinancing, capex or maturities force asset sales or dilution before recovery arrives.
Do the cash flows justify the price?
What supports it
Conservative sustainable income still leaves a margin for disappointment.
What weakens it
The apparent discount depends on stale NAV, distributions funded by borrowing or a full recovery.
What evidence would change the call?
What supports it
Issuer-specific refinancing and cash-flow improvement support the working view.
What weakens it
Persistent income losses outweigh funding relief; bonds and shares rally only with broad risk appetite.
Where necessity becomes cash flow
Hong Kong does not need to recover every part of its old identity to remain useful. It does need enough people on both sides of a transaction to keep choosing it. Maybe its future is less about being loved than remaining necessary. For investors, the work is finding where that necessity becomes cash flow—and where the price still leaves something to earn.
Source notes
Research cut-off: 29 October 2026. This reader edition preserves that research; it is not a research refresh. Historical chart window: 2025. Company evidence: H1 / 30 June 2026. This is a city and investment framework, not a live valuation or positioning recommendation. The timing exercise is conceptual. Local colour reflects the author’s supplied observations, not measured traffic or spending.
[1] HKMA / HKSAR Government — Offshore RMB function and 2025 lending
RMB935bn lending. Over-70% SWIFT share also reported by the HKMA annual-report summary.
Open primary source ↗ · HKMA annual-report summary ↗[2] HKMA Quarterly Bulletin — The Hong Kong debt market in 2025
Northbound Bond Connect average daily turnover; foreign-turnover share. Annual observations, RMB billion.
Open primary source ↗[3] HKMA — Response to media enquiries
May HK$129.4bn inflow and the liquidity / rate-differential / carry-trade mechanism.
Open primary source ↗[4] HKMA — Half-Yearly Monetary and Financial Stability Report
Twelve weak-side operations, HK$119.9bn, late June to mid-August; reversal in interbank liquidity.
Open primary source ↗[5] HSBC Hong Kong — 2025 one-month Hong Kong-dollar rate archive
HSBC’s own quote, not necessarily the HKAB fixing. No imputation or smoothing; lines join published observations.
Open primary source ↗[6] Federal Reserve — Open Market Operations: target range history
Target range changes effective 18 September, 30 October and 11 December 2025. Overnight policy range, not a one-month USD rate.
Open primary source ↗[7] Swire Properties — 2026 Interim Results
Attributable HK office and retail income: printed pp.15/17. Financing, cash, facilities and maturity ladder: printed pp.38–40. Company-reported; not a valuation.
Open primary source ↗