Paul,
I'm sure they are conjuring up some crafty plan to soundly defeat and break, once and for all, the HKMA and the $HK because the opposition did not 'play by the rules' (they cheated). They have to show the governments of the world that those who don't play fair will pay.
I hope the hedge funds remember that they also broke the rules, by publicly stating their intention to break the peg. This gave the HKMA a political platform to stand on while using the lever of their reserve strength. If the funds had been a little more subtle about their moves, they might have gotten away with it. It will be interesting to see what they come up with next. I would guess (likely wrong) that their capacity for leverage, and thus their options, would be somewhat reduced these days. It would take a brave banker to underwrite a major bet on emerging currencies in today's environment.
Hedge funds might also do well to recall that Governments have the power to make the rules, within their own territories at least.
Obviously, nobody has to worry about the Philippines mounting the kind of defense that HK did. They simply haven't got the reserves. I do expect the funds to tread fairly lightly in the vicinity, though. The market here is small enough that significant fund plays would be difficult to conceal. With a growing consensus emerging in favor of regulation of their activities, the last thing the funds need is to be seen ganging up on a small and inoffensive country that has been doing its best to follow the rules. It would not be a smart move, if they're following political indicators as well as economic ones. I wonder if they are...
Steve |
