Hong Kong Monetary Authority (HKMA) has pumped HK$1.56 billion into the money market yesterday to ensure sufficient liquidity as credit tightened amid global financial crisis.

"Short-dated Hong Kong dollar interest rates increased today, reflecting in part heightened concern about global credit and liquidity conditions as a result of recent developments in the global financial markets," said a spokesman from Hong Kong's central bank yesterday.

The one-month Hong Kong interbank rate surged from 4.75 to 4.85 percent on Thursday morning. It is the highest since October last year when the HKMA first injected money into the market, raising inter bank rate from 2.18 to 2.23 percent. The one-month interbank rate dropped to 3.57 from 3.70 percent after the funds injection.

"The Hong Kong dollar exchange and money markets are operating smoothly. After the injection of HK$1.56 billion, the pressure will be alleviated," said Financial Secretary John Tsang.

Earlier in the day, the US Federal Reserve, the European Central Bank and other central banks led by Japan, India and Australia pumped an additional $180 billion into markets.

The SAR government has pledged to inject more money to save the market, if needed.

"If necessary, HKMA will deploy further measures to inject liquidity into the market," Tsang added.

However, analysts said money injection can only soothe the market worries temporarily.

Patrick Shum, executive director of Karl Thomas, said: "The basic function of the injection is to pull the interbank rates down. The market may rebound for a day or two, helping ease the pressure on stock and property markets. But it really depends on how the US financial crisis can be solved in the long run. If the US' credit crunch continues, even injections may not turn the situation around, he added.

Joe Lo, an analyst from Citigroup, said in a statement that the HKMA's liquidity injection is more a gesture of supporting the market than a solution. The current market turmoil is the fallout of global financial problems which are difficult for HKMA to solve. It requires coordinated efforts of major central banks, Lo added.

(HK Edition 09/19/2008 page1)