Hong Kong Injects Liquidity To Stabilize Banking Sector

September 25, 2008 7:19 a.m. EST

Hong Kong (AHN) - The Bank of East Asia Ltd. said on Thursday that the run on its deposits has eased as the government infused capital into the money market.

Additional capital came from investor Li Ka-shing, who bought shares in the company, raising confidence in the traders on Thursday.

A text message questioning the health of the Bank of East Asia on Wednesday, lead to the panic among the customers as they began withdrawing their savings and deposits.

However, Hong Kong Monetary Authority Chief Executive Joseph Yam retreated on Thursday that the firm is stable after liquidity infusion and that the banking sector of the country has enough capital.

A Hong Kong Monetary Authority also rejected the rumors questioning the stability of the Bank of East Asia and said the rumors were unfounded.

The country's central bank, Hong Kong Monetary Authority, added $500 million (3.88 billion Hong Kong dollars) into the financial sector on Thursday to ease the strain in the money market.

"The banking system of Hong Kong is safe and sound. Local banks are well capitalized and highly liquid. Their asset quality is good and their operations have been strong. BEA's capital adequacy and liquidity ratios are well above regulatory requirements," HKMA spokesperson said on Wednesday.

Shares of the firm, which had dropped by as much as 7 percent yesterday, gained on Thursday to 5 percent after Hong Kong regulators pledged to inject more capital if necessary.