Good post. The speculators wont Hong Kong hands to be tied as this double play goes on, free market economy does not mean to bleed a government to death by first checking their resolve on the peg and than once interest rates are increased to keep the parity short the stock market, those who are since last week criticizing the abandonment of lofty ideals of free market by Honk Kong should understand that if short sellers are able to take out the market without government intervention the peg will disappear automatically, with stock market being indiscriminately sold to lows the ensuing panic may lead to run on the reserves, the 90 billion's being wiped out in 12 months will be non-existent in three months, they will end up in the coffers of short funds, the rich will become more richer at the expense of ordinary investor. If you remember Sorros Chief strategist was wandering that it was a great year except losses in Russia still they are 19% up, now this 19% up is through leverage which a government cannot resort too.
I am a free market econometeer but when the funds went after France and Germany soon after debacle of pound we saw the two countries protected their currencies through massive intervention it did result in France raising the band but eventually the battle was won by French and Germans, the interest rates did converge so did the exchange rate which returned to normal band after some time, no short speculator had since tried to check the resolve of the Franc-fort approach. How can you deal with vandals on your door who at any given time can ask for far bigger liquidity than available in the system, short funds have a role to play as they keep valuations under wraps but if things go out of hand like the way they were trying to rip China and Hong Kong I think Tsang The chief Secretary was right to hit them hard, Friday as 90,000 contract expired the shorts had bloody noses they wanted HSI to be lower on Friday so they closed the positions in the money, someone of course paid out big time on Friday to settle 90,000 contracts cash, I have information that some major stock brokers had run huge short positions under anticipation of 15% drop that not materializing should have hurt the shorts far more than the HSI or Hong Kong monetary authority.
Markets is a two way place it was unfair criticism on part of financial media to criticize Hong Kong for what constituted an attack to very stability of global monetary system, the common slogan was take Hong Kong out every thing else will follow as Yuan is devalued, Yen will be under pressure and hence the shorts would be great all around, the part one on Friday ended nicely.
It was nice to see HK authorities let the bourse go down today after expiry the pain becomes more to see the bourse on your levels a day after, they should be selective but the timing was absolutely perfect. If they have to maintain the peg they need to see that they are not forced to capitulate due to external leveraged short selling 'the double affect'. |
