Tom and Stitch,
I picked this up this morning. You probably already read it, but thought I would post it for others. Thanks for your responses. The support of either China or Hong Kong currencies are the one and the same to me. I'm sure if one goes, there goes the other. China has $80 billion (USD) to support the peg. I'm not sure if it is enough when a lot of currency traders, from all over the world, are fighting you. Do you have any opinions on this?
Say it does come about, what effects do you think we will see? I still don't see it being, in reality, that damaging to the Asian Tigers, but it's the "percieved" damage I'm concerned with. Especially in the US markets which are dying for some reason to correct. I worry that devaluation will be that catalyst. People all around the world will take it as an indication that "China is falling." I know, kind of stupid, but it's hard to argue with emotions. Currency pegs are not a good thing(IMHO). They always lead to standoffs and volatile moves. I bet Soros loves them though.
If you scroll down to the bottom of the article, the writer feels the US stock market may be a catalyst for the peg to drop. Interesting. I never heard this before. It's like it's showdown time at the OK Corral and there are a lot of itchy trigger fingers.
Thanks, MikeM(From Florida)
>>Regent Pacific Says 50% Chance of Peg Breaking
STEWART OLDFIELD
Listed fund manager Regent Pacific has taken a US$15 million short position against the Hong Kong dollar, saying there is a 50 per cent chance the peg will break. Regent Pacific chairman Jim Mellon said the fund manager had taken the position - which represents about 10 per cent of the firm's current net assets - in the past month.
Mr Mellon said he believed a number of foreign hedge funds had taken sizeable positions against the local currency. "It is a good time for it because rates have come down and forward rates are very cheap," he said. The three-month interbank rate has fallen to 7.25 per cent from a January high of 18 per cent and a peak above 40 per cent in October. Mr Mellon said the fund manager had taken the short position mostly as a precautionary move rather than an "outright speculative move".
"If the peg goes it's not because of fund managers like us, it will be because the mainland devalues its currency and people start moving money from Hong Kong to the US," he said. If the peg was broken, the Hong Kong dollar would lose 30 per cent of its value, he claimed.
He said there was a 50/50 chance Beijing would devalue the yuan and if a devaluation did occur the peg was certain to break. Mr Mellon said suggestions speculators could be burned by higher interest rates were not true and claimed they could actually profit from the increases.
Asked if another speculative attack on the Hong Kong dollar was imminent, Mr Mellon said: "We are about to go into another downturn." He said Regent Pacific would maintain its policy of not holding any assets in Hong Kong dollars. The fund manager has long-maintained a bearish outlook on the region and has already shifted its focus to Russian and eastern European markets.
Mr Mellon said Hong Kong's financial economy was being propped up by United States mutual funds and its "real" economy was as "sick as a parrot". A spokesman for the Hong Kong Monetary Authority said confidence in the Hong Kong dollar remained high. He said prices in Hong Kong would adjust to maintain the economy's competitiveness.
"Hong Kong is still very competitive," he said. Hong Kong's leaders have repeatedly stressed the government remains committed to the pegged exchange rate.
Mr Mellon said a Wall Street correction would badly affect the Hong Kong market. In addition, political unrest in Indonesia could spark a sell-off by US institutional investors of all markets in the region. He said: "Whether it is Hong Kong, Jakarta or Bangkok, they see it on CNN and they sell - it's all the same to them."<< |
