Hong Kong’s portfolio investment saw a net outflow of HK$239.17 billion (S$41.4 billion) during the July to September quarter, the highest in a year, as investors pulled money out from equities and investment funds amid lacklustre returns.

The quarterly outflow rose 34.4 per cent from the previous quarter when net outflows totalled HK$177.9 billion.

The outflow was mainly driven by equities, and came amid initial public offerings on the Hong Kong Exchanges and Clearing plummeting 74 per cent for the first nine months this year from a year earlier.

The Hang Seng Index was the third-biggest loser among all Asia Pacific stock benchmarks, behind the Shenzhen Component Index and South Korea’s Kospi 200.

Although Hong Kong’s government has loosened some of the city’s Covid-19 measures that squeezed tourism and consumer spending, the economy’s fortunes remain closely tied to the mainland. China’s slowdown and pandemic measures have weighed on the financial hub’s economic activities.

“The third quarter data does not account for the improvement in investors’ sentiments due to China’s reopening its economy in November as it transitions out of zero-Covid policies. I’d expect portfolio investment may revert to a net inflow during the fourth quarter,’ said Samuel Tse, an economist at DBS Bank.

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The weakening of the Hong Kong dollar against the US dollar may also have played a role, Tse said.

Under the city’s linked exchange rate system, the HKMA has this year completed 41 rounds of intervention and bought US$30.9 billion US dollars in the market to keep the local currency from weakening past 7.85. The Hong Kong dollar is pegged in a tight band between 7.75 and 7.85 to the US dollar. REUTERS