Personal opinion, read at your own risk:
I don't think Tung's administration is going to abandon its
defense of HKD peg with greenbacks. Under current conditions,
HK banks have no liquidity to support the market's free fall
reason being for very 7.8 dollar they provide to the market,
banks have to sell 1 US dollar in order to maintain the peg.
Without enough greenbacks in reserve, peg can't be maintained.
That being said, there is a huge catch!
China, Taiwan and Japen in that order are the top three central
banks with the largest greenback reserves. China has hundreds
of billions. I believe China's Dollars reserves are with People's
Bank, Shanghai and Hong-kong Banking Corp, Bank of Communications,
Central Bank, possibly CitiCorp.
There are two thoughts behind why HKD's are being attcked:
1. High real estate prices. (I am dididididizzy, man!!)
2. Hedge funds' speculations.
Reason #1 is likely, then there is not too much to worry
about the peg. Higher interest rate will slow down the real
estate pace. With a high interest rate environment, equity market
suffers. Actually, this will make HK more competetive in the
long run in APAC.
Reason number two is a speculation on my part. If it is true, then
the hedge funds are trying to catch China unexpectedly. As we all
know China just in recent years became a player on the international
scene. RMB is not a international currency which can be exchanged
freely. A large greenback reserve became a must. So it's not a
surprise Central Bank and People's bank got tons of it. If hedge
funds are indeed shorting HKD and Chinese goverment finally realizes
someone is playing a game, retaliation will likely be quick and
severe from Zhu's agency and China Central Banks.
I personally believe HK will successfully defend HKD in the short run.
With a stable currncy, equity market will find its bottom soon.
PS HKD was pegged in 1984 by a British Gentleman(Greenwood?).
PPS I added Amat today at $33 |
