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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Paul Berliner who wrote (5663)	8/19/1998 12:51:00 PM
From: tom	Respond to of 9980

Hedge funds continue to short the HK equity market A few bits of info on HK market 1. Hedge funds are desperate to borrow stock in the HK market in order to go short (The HKMA is also trying to borrow the stock to stop them). The annualised cost of borrowing stock in HSBC is 4% and in China Telecom it is 7%. These rates are 4-5 times what they were even a few weeks ago. 2. One of the people who has borrowed stock is George Soros (this is actually a fact but I can understand if you don't take my word for it). Do you think he could have written the letter to the FT concerning a rouble devaluation and shorted HK at the same time knowing that it would fall if Russia devalued? Surely not! My gut feeling is that HK won't be down that much as everyone is already so short and the Yen is slightly stronger but it still should be fun. I guess we'll wait and see.... Tom

To: Paul Berliner who wrote (5663)	8/19/1998 2:12:00 PM
From: Ron Bower	Read Replies (1) \| Respond to of 9980

Paul, I don't think I understand currencies. If the $HK were traded and the peg were broken, what would happen? As I understand it, the HKMA has more foreign exchange reserves than there are $HK in circulation. 60% of these funds in $US. Seems to me the value should be equivalent to the assets backing the currency? If the peg were broken, the $HK should go up and I don't understand the pressure to break the peg if the $HK is undervalue. Based on this, it seems to me that the HKMA should let the $HK float. What determines the value of a currency? The yen and other currencies are falling because...? Could you or others explain? TIA, Ron