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Strategies & Market Trends : HONG KONG
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To: Chung Lee who wrote (2111)8/16/1998 12:57:00 AM
From: Ron Bower  Read Replies (2) of 2951
 
Chung Lee,

Seems we have divided camps on the intervention. You seem to approve of Sir Donald's action as I do.

The subject was also brought up on the Asia Forum. After doing some more reading I find that the hedge funds are pretty well admitting that they are trying to break the peg. My post on the AF says the hedge funds involved should be prosecuted for market manipulation.

This is just the beginning. The HKMA's action was joined by the various companies buying back their own stock. This pushed up the market and gave the funds a new opportunity to short. With the turmoil, other buyers are staying away but the HKMA has likely stopped panic selling. It now comes down to a war between the hedge funds against the companies and the HKMA.

The HKMA will have to buy enough that that the funds are unable to cover shorts. If the HKMA can hold off the funds until the end of the month, I believe the funds will be forced to cave. Only by causing them losses can HK stop the attacks.

I believe it critical for HK to win on this. If they lose the peg, they lose control of their own economy, their own destiny. HK is different in this could cause HK to lose it's 'one country, two economies' status. If the funds are successful, look for China to let the $HK be traded equally for the yuan and the HKMA foreign reserves transferred to the mainland.

Then we'll see if the funds can figure out how to make China let the Rmb be trade on the currency markets.

JMHO,
Ron

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