Hong Kong Should Strictly Enforce Regulatory Regime To Control Asset Prices: IMF

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Strong capital inflows could lead to rapid credit growth in Hong Kong's financial system, fueling asset markets and creating macroeconomic volatility, the International Monetary Fund said in a report on Thursday. The government should strictly enforce the existing regulatory regime, while countervailing prudential measures could play a role in mitigating the credit-asset price cycle, said Washington-based lender.

Noting that the recovery is still fragile, the IMF endorsed plans to maintain fiscal support in the upcoming 2010/11 budget. The lender expects the economy to grow 5% next year, while the jobless rate is forecast to fall to 4.8%.

Further, the IMF said the real effective exchange rate of the Hong Kong dollar continued to be broadly in line with economic fundamentals. To protect low-income workers and to minimize labor market distortion, the IMF urged caution in setting a statutory minimum wage.

Strong capital inflows could lead to rapid credit growth in Hong Kong's financial system, fueling asset markets and creating macroeconomic volatility, the International Monetary Fund said in a report on Thursday. (Market News Provided by RTTNews)