Why Hong Kong's service sector remains unfazed amidst headwinds

It's reflected by service account surplus.

The current account registered a deficit of HKD6.2bn in 1Q14, and Hong Kong’s current account surplus has since 2009 been persistently narrowing.

According to a research note from UBS, Hong Kong’s competitive service sector continues to hold up very well, reflected in the persistent surplus in the service account.

Hong Kong has been an exporter of capital until recently. The successive round of quantitative easing by the US has led to the inflows of capital into Hong Kong since 2009.

Meanwhile, the report noted that liquidity conditions are turning less favourable.

While the interbank rates could stay low for quite some time along with the US rates, retail rates could still edge up if banks’ costs of funding rise.