Two months after the government took action to rein in property prices, hot money appears to be active again in the real estate and equity markets. This is worrying Norman Chan Tak-lam, the Hong Kong Monetary Authority's chief executive.
On a day when the Hong Kong stock market rose 556.62 points, or 2.41 per cent, to close at 23,652.94 - with most property stocks enjoying gains - Chan sought to reassure lawmakers that the government could consider more measures if the recent restrictions proved ineffective. But he admitted that the weapons available in the government's fiscal and monetary arsenal to combat speculation-led asset inflation were limited.
He said the measures, announced on August 13, had some effect in September but there were signs in the first two or three weeks of October that the market was stirring again.
'If the situation persists, that means the risk of exposure to banks is increasing. We will keep a very close eye on that and when necessary measures will be taken,' Chan said.
'But there are tools we cannot use in Hong Kong - for instance, the control of capital in and out of Hong Kong. We are an open economy. Our law ensures that capital can flow in and out of Hong Kong freely. So we can only use what we have.'
Some lawmakers, such as Lee Wing-tat, want more to be done to curb rising property prices, which have fuelled discord within the community as more and more people fear they are being quickly priced out of the housing market. Many effective targeted measures, such as an interest rate rises, are not available because the currency is linked to the US dollar, which largely ties the city's economic health to that of the US.
