Hong Kong officials sound off warnings on Hong Kong's financial stability

Political uncertainty is one of them.

In recent days, government officials have sent out three warnings on Hong Kong’s financial stability, following news about the 2Q14 GDP slowdown.

According to a research note from Barclays, on 10 August 2014, Hong Kong Financial Secretary John Tsang warned that political uncertainty could increase the risk of an economic crisis, which could bring about “a perfect financial economic storm” to Hong Kong.

On the next day, 11 August 2014, HKMA Chief Executive Norman Chan expressed the concerns over the financial stability in Hong Kong.

Here’s more from Barclays:

With the market expecting the US Federal Reserve to start raising interest rates around mid-2015, Hong Kong may face the pressure of downward adjustments of asset prices.

He warned that the more than US$100bn that has flowed into the Hong Kong dollar since August 2008 may flow out as US interest rates normalise, leading to a contract in liquidity, rising domestic interest rates and possibly falling asset prices.

Following on from the financial secretary and the HKMA’s chief executive, Hong Kong Secretary for Financial Services and the Treasury warned again that “hot money” flowing in ahead of cross-border stock scheme could leave just as quickly due to a poor economic outlook and fears of a US interest rate rise.

The government said it will keep a close eye on the risks of fund flows in and out of Hong Kong.