|Day's Range||26,410.41 - 26,564.36|
|52 Week Range||24,540.63 - 30,280.12|
Could short-sellers be plotting another attack on Hong Kong's currency and stock and futures markets like what happened in a terrifying moment in 1998?Hong Kong Monetary Authority Norman Chan Tak-lam said this week that even if speculators tried to attack, Hong Kong's financial system is too big now for them to succeed.Is he right?Here's a look at short-selling, and why the possibility of a 1998-style attack " capitalising on the city's economic weakness due to the trade war and protests " is being talked about.What is short selling?Short selling is by investors who have a bearish view on a stock, benchmark or currency. Hong Kong currency peg to US dollar isn't an Achilles' heel " it's an Achilles' shieldIf they see a big fall ahead, they can borrow such things at their current price, wait for them to fall, then buy and replace, pocketing the gain.It is legal.Such type of trading is legal and can be used a hedging tool to manage risk.What chaos can short-sellers cause?US billionaire George Soros broke the Bank of England in short selling the pound in 1992.He and other speculators successfully sold short and forced Thailand, South Korea, Japan, Malaysia, and Indonesia to devaluate their currencies during the year-long Asian Financial Crisis that began in July 1997.It spilled over into Hong Kong.Speculators including Soros deployed a "double play" strategy to manipulate both the city's currency and stock market from late 1997 to 1998.The speculators again and again shorted both the Hong Kong dollar and stocks on the Hang Seng Index, as well as index future contract. The monetary authority raised borrowing costs to try to stop them. Panic and a credit crunch followed. Hong Kong US dollar peg could be a weak link if protests drag onThat all led to a huge spike in the overnight interbank interest rate " or Hibor " which shot up 300 per cent on "Black Thursday" October 23, 1997. The one-month Hibor rose to 10 to 20 per cent in the following months, up from the normal about 5 per cent. The interest rise sparked a huge drop in major stocks. And the Hang Seng Index went down more than 50 per cent in a year.The speculators " who were netting huge profits " were gambling on the government not intervening.How did the government hit back at short sellers?In a dramatic story, some of whose details Chan only revealed this past week, the government invited the chief executives of the three largest stockbrokers in Hong Kong to the China Club for breakfast on the morning of on Friday, August 14, 1998. They were asked to finish their coffee and switch off their mobile phones, and Chan then took them to the HKMA office, he wrote in his blog this week. Several dozen Hong Kong retailers likely to fold as protests hit sales"They were told in strict confidence that the government had decided to intervene in the stock and futures markets to counter the double play. They would need to go back to their offices and open stock and futures trading accounts for the HKMA immediately, as we would soon be starting the operation on the very same day," Chan said, meaning the government was entering the markets to buy.On the first day of the intervention, because of all the government buying, the Hang Seng Index rebounded by 564 points, or 8.5 per cent. Meanwhile, the Hong Kong dollar's peg to the US dollar remained intact.The government only announced its intervention in that evening.After 10 trading days, on August 28, the index was up 18 per cent to 7,830, double the level of 4,000 that many media reported at the time was the level the speculators wanted to drive it down to, Chan said.The monetary authority was complimented by Soros on a visit to Hong Kong in 2001. It did "a very good job when they intervened to arrest the collapse of the Hong Kong market."After it beat the short sellers, the government sold the shares to the public by creating an index fund called the Tracker Fund in 1999. The Exchange Fund " the monetary authority's reserve fund to keep the local currency stable and the financial markets stable " kept about HK$51.3 billion worth of shares as a long-term investment.SCMP Graphics alt=SCMP GraphicsBy pushing up the value of stocks and the defending the Hong Kong dollar through buying, the monetary authority whipped the short sellers and saved Hong Kong from unimaginable financial chaos.What are the differences between 1998 and 2019?Some bearish fund managers " such as Kyle Bass, Thomas Roderick and Kevin Smith " have been talking down the Hong Kong dollar and local markets in recent months because of the trade war and protests.But Chan said 1998 won't happen again."The capital market in Hong Kong has grown much bigger, which means the short sellers need to spend much more to move the markets. They would need much more bullets than two decades ago, and that would be just too expensive for them," Chan said.The Exchange Fund is now 3.5 times larger than in 1998. The stock market's capitalisation is 8.4 times larger. Daily turnover is up to 11.5 times more. All of these make manipulation through short selling harder.Regulation are tougher, too.In 1998, the market did not know when the HKMA would intervene.SCMP Graphics alt=SCMP GraphicsNow the authority requires that the Hong Kong dollar trade within the band between 7.75 to 7.85 to the USD. It also says it will report intervention quickly on its website.The city's Securities and Futures Commission added in a number of market rules, position limits and reporting requirements to add curb son short-selling of individual stocks and Hang Seng Index futures. These limit these activities and make sure the regulators know about the large short-sellers' movement.Despite the trade war and protests, the local stock market and banking system are considered strong.What happens to other countries when facing short-sellers attacks?During the Asian financial crisis, the Hong Kong dollar peg to the US dollar was one of only a few that remained unchanged due to the government intervention. Other Asian currencies weakened substantially against the US dollar as a result of speculators' attacks. The Thai baht weakened by 56 per cent, the Indonesian rupiah by 85 per cent, the South Korea won by almost 95 per cent " having to use up its foreign currency reserves. Malaysia's currency fell 50 per cent and the Japanese yen dropped 34 per cent in a year.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
U.S. stocks struggled to hold on to modest gains on Thursday as investors weighed better-than-expected housing and manufacturing data, a day after the second interest rate cut of 2019 by the Federal Reserve.
Target and Microsoft stock were early leaders and Herman Miller scored a breakout, while the S&P; 500 and Dow Jones today aimed to turn the week positive.
Hong Kong stocks fell for a fourth straight day, their longest losing streak in six weeks, on concerns there will be more protests ahead of China's National Day.The Hang Seng Index dropped 1.1 per cent to 26,468.95 at the close on Thursday. The four-day decline was the longest since a stretch of five days that ended on August 6. Cosmetics retailer Sa Sa International Holdings said the civil unrest in the city was hurting its sales.Concerns were running high that more demonstrations will be organised in the build-up to China's National Day holiday that falls on October 1. The Hong Kong government said this week that it would not concede to other demands by the protesters after withdrawing the controversial extradition bill that sparked the crisis."The internal systemic risk facing the Hong Kong market is still there," said Ken Chen Hao, a strategist at KGI Securities in Shanghai. "The market seems to be beginning to price in the political risk of more uprisings ahead of the National Day holiday."A 25 basis-point cut in the benchmark interest rate by the Federal Reserve, duplicated in Hong Kong, failed to ease selling, as analysts said the move had been widely expected.The rate cut "was in line with the consensus forecast and market pricing ahead of the meeting," said Daragh Maher, head of US forex strategy at HSBC Holdings. "Expectations for the scale of easing had been pared back in recent weeks on the back of some Fed rhetoric which had downplayed the need for anything more aggressive." Hong Kong cuts base rate by 25 basis points in lockstep with US FedInsurer AIA Group and Hang Seng Bank were the worst performers on the Hang Seng Index on Thursday, falling at least 2.4 per cent.Sa Sa joined apparel retailers Bossini International Holdings and Esprit Holdings, and restaurant operator Fulum Group, as the latest victims of the biggest civic upheaval since the city's handover in 1997.Sa Sa dropped by as much as 2.3 per cent in intraday trading after saying sales fell by about 15 per cent from a year earlier in the five months ending in August. Revenues decrease 28 per cent last month alone, it said.Clothes shop chain Bossini is one of the latest Hong Kong retailers to see sales hit hard by the protest rallies. Photo: K. Y. Cheng alt=Clothes shop chain Bossini is one of the latest Hong Kong retailers to see sales hit hard by the protest rallies. Photo: K. Y. ChengChina's Shanghai Composite Index fared better, mainly thanks to a late rally, as traders shifted their focus to the forthcoming release of the prime rate on loans for signals of further policy easing. The index rose 0.5 per cent to 2,999.28 for a second day of gains.The loan prime rate, which is now released on a monthly basis after an overhaul by the central bank last month, is due on Friday. The 1-year charge on the borrowing cost will probably fall by five basis points to 4.20, according to a Bloomberg survey.Tianjin Printronics Circuit jumped by the 10 per cent daily limit to 12.71 yuan in Shenzhen on a plan by its parent company to start mixed-ownership reforms.Tianjin Zhonghuan Electronic and Information Group, which has a 25 per cent stake in the listed company, began the process of asset checks, auditing and evaluation ahead of the move, according to an exchange statement.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
The major Asia Pacific stock indexes are mostly higher in the wake of interest rate and policy decisions from the U.S. Federal Reserve and the Bank of Japan.
Asian markets were mixed in early trading Thursday, as the Bank of Japan kept its ultra-easy monetary policy unchanged following the U.S. Federal Reserve’s interest-rate cut.
U.S. stocks ended Wednesday flat to higher, after the Federal Reserve announced it would cut its benchmark federal funds rate a quarter percentage point, in line with market expectations, but called into question whether there will be another rate cut this year or next.
Stocks in China and Hong Kong ended mixed, as traders awaited a Federal Reserve meeting that will decide if interest rates will be changed.The Shanghai Composite Index added 0.3 per cent to 2,985.66 at the close on Wednesday, rebounding from its biggest decline in 10 weeks a day earlier. Hong Kong's benchmark Hang Seng Index slipped 0.1 per cent to 26,754.12.The Fed decision, which is due at 2am Hong Kong time on Thursday, will set the stage for global monetary policy through the rest of the year, as lots of emerging nations follow the Fed's rate moves to maintain the stability of their currencies and prevent capital outflows. Citic Securities said it was a matter of time before the People's Bank of China lowered borrowing costs, should the Fed cut the benchmark interest rate this time. Fiery liquor maker Wuliangye rises to record after Citic raises price targetThere is an 83 per cent probability that the Fed will cut the interest rate by between 17.5 and 20 basis points at the meeting tomorrow, according to Bloomberg data."The US president attempts to influence the Fed to cut rates publicly and directly," said Hannah Anderson, a strategist for global markets at JPMorgan Asset Management. "The Fed maintains its focus on the economic data, but the economic data is also weakening in response to Presidential policy choices " namely the trade war " which can then induce the Fed to cut rates."Liquor distillers led the pack in the mainland on expectations that industry juggernaut Kweichow Moutai will increase supply in the fourth quarter. The stock gained 5 per cent to a record 1,148.90 yuan. Smaller rivals Wuliangye Yibin rose 3.1 per cent to 135.56 yuan and Luzhou Laojiao added 2.7 per cent 90.20 yuan. Drone strikes in Saudi Arabia may push China to diversify oil supply, analysts saySou Yu Te Group surged by the 10 per cent daily limit to 2.62 yuan in Shenzhen trading after the clothes maker said it had agreed to set up a supply-chain unit with an investment arm of the Guangzhou municipal government. Sou Yue Te will hold a 40 per cent stake in the 80 million-yuan (US$11.3 million) joint venture, it said in an exchange statement.Beijing HualuBaina Film & TV surged 8.3 per cent to 6.27 yuan in Shenzhen after the filmmaker said its biggest shareholder Infore Investment Holdings had boosted its stake in the company by 1 per cent.Crude oil-linked stocks slumped as Saudi Arabia said it had already restored 41 per cent of the capacity at an oil-processing complex that was attacked by a drone earlier this week. China Petroleum & Chemical Corp, also known as Sinopec, fell 1.7 per cent to 5.07 yuan in Shanghai, and PetroChina, the nation's biggest oil producer, slipped 1.4 per cent to 6.33 yuan. Their Hong Kong-traded stocks slid 2.1 per cent and 1.6 per cent respectively.Oil futures fell as much as 1.2 per cent on Wednesday in New York after tumbling 5.7 per cent a day earlier.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Crude oil prices plunged on Tuesday after the Saudi energy minister said the kingdom’s oil supply will soon be back online. The drop in crude oil prices spread weakness throughout the Asia Pacific region on Wednesday.
U.S. stocks finish Tuesday’s session with modest gains on the back of defensive bets as investors focus on a decision on interest rates from the Federal Reserve set for Wednesday after a weekend attack in the Middle East that roiled global energy markets.
(Bloomberg) -- Treasuries rallied and stocks eked out a gain a day before the Federal Reserve is expected to cut interest rates. Oil plunged as Saudi Arabia restarted the plant damaged in a weekend attack.Crude gave back some of Monday’s 15% surge as Saudi officials said they had restored just under half the output lost at the Abqaiq plant, one of the world’s biggest oil facilities. The S&P 500 Index posted a small advance, with dividend paying real-estate shares faring best. Ten-year Treasury yields fell toward 1.8% and the dollar weakened after the New York Fed took action to calm money markets, injecting billions in cash to quell a surge in short-term rates that was threatening to drive up borrowing costs for companies and consumers.As U.S. policy makers get ready to decide interest rates, investors are also trying to gauge the risk of a potential oil shortage weighing on a global economy that already seemed to be slowing down. Meanwhile, concerns linger about trade tensions, with U.S. and Chinese working-level negotiators set to resume talks in the next week, before a meeting of top officials in October.The Saudi attack has reminded investors about the risks of geopolitical tensions escalating, according to Nela Richardson, an investment strategist at Edward Jones in St. Louis.“We’ve pointed to U.S. trade escalation, we’ve pointed to Brexit, but we’ve seen that over the course of the last two years, unexpected triggers of risk can pop up,” she said. “And we don’t always know where that’s going to come from.”The Stoxx Europe 600 edged lower. Equities in Shanghai and Hong Kong slid after China’s central bank disappointed investors when it refrained from lowering a key interest rate. Italian bonds fell after former Prime Minster Matteo Renzi left the Democratic Party, raising the prospect of further government instability. Emerging-market stocks headed for their first decline in five sessions.These are some key events to keep an eye on this week:The Federal Reserve is widely expected to lower U.S. interest rates in response to slowing global economic growth and muted inflation. Chairman Jerome Powell will hold a post-decision press conference Wednesday.The Bank of Japan monetary policy decision is on Thursday, followed by a briefing from Governor Haruhiko Kuroda.Bank Indonesia and Bank of England also decide policy on Thursday.Australia jobs figures are out Thursday.Friday is quadruple witching day for U.S. markets. When the quarterly expiration of futures and options on indexes and stocks occurs on the same day, surging volatility and trading can follow.Here are the main moves in markets:StocksThe S&P 500 Index rose 0.2% at the close of trading in New York.The Stoxx Europe 600 Index slid less than 0.1%.The Shanghai Composite Index declined 1.7%.CurrenciesThe Bloomberg Dollar Spot Index fell 0.2%.The British pound rose 0.6% to $1.25.The Japanese yen was little changed at 108.16 per dollar.The euro rose 0.7% to $1.1072.BondsThe yield on 10-year Treasuries declined four basis points to 1.8%.Germany’s 10-year yield rose one basis point to -0.48%.Britain’s 10-year yield was little changed at 0.69%.CommoditiesGold climbed 0.3% to $1,503.13 an ounce.WTI crude dropped 6.1% to $59.06 a barrel.\--With assistance from Gregor Stuart Hunter, Andreea Papuc and Laura Curtis.To contact the reporters on this story: Vildana Hajric in New York at email@example.com;Brendan Walsh in Austin at firstname.lastname@example.orgTo contact the editors responsible for this story: Samuel Potter at email@example.com, ;Jeremy Herron at firstname.lastname@example.org, Brendan Walsh, Todd WhiteFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
U.S. Treasury yields retreat on Tuesday as investors as investors gear up for the Federal Reserve’s policy decision on Wednesday, from which a quarter percentage point interest rate cut is expected.
Home Depot stock weighed on the Dow Jones today and oil prices eased somewhat after Monday's spike.
Just as the Fed is set to ponder an interest rate cut amid fears of a US slowdown, the People’s Bank of China has kept its one-year interest rate steady.
(Bloomberg) -- China’s restrained approach to easing spooked financial markets Tuesday, with stocks and the yuan dropping the most in weeks.The Shanghai Composite Index retreated 1.7%, its biggest decline in more than two months, to close below the psychologically important 3,000 level. The onshore yuan fell 0.37%, the most in three weeks, to 7.0950 a dollar as of 5:23 p.m. in Shanghai. The yield on China’s 10-year government bonds rose for a sixth day. In Hong Kong, the Hang Seng Index lost 1.2%.China’s central bank drained funds from the financial system and kept the one-year rate on medium-term loans steady on Tuesday morning, a move analysts said shows it’s sticking with its prudent approach to stimulus. That’s even after data Monday signaled the economy slowed in August, with industrial output, retail sales and fixed-asset investment rising less than anticipated.“Investors now realize the central bank won’t ease its monetary policy as aggressively,” Zhang Gang, a strategist with Central China Securities Co. “The market was due for a pullback after the Shanghai index climbed above 3,000 point level. Turnover failed to keep up.”Tuesday’s losses break the calm that had returned to the country’s stocks, bonds and currency markets in recent weeks, helped by the expectation China wouldn’t allow anything to overshadow its National Day on Oct. 1. A thaw in the trade war had also helped boost sentiment.The move from the People’s Bank of China comes after its cuts to banks’ reserve ratios came into effect this week, adding an expected 800 billion yuan ($113 billion) in liquidity to the financial system. The Federal Reserve is widely expected to lower interest rates at its policy meeting this week.Stock turnover has dropped since early September, when the Shanghai Composite Index tested the key 3,000-point level intraday for the first time in two months. It was about 26% lower than this month’s high on Tuesday.\--With assistance from Ken Wang.To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at email@example.com;Tian Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Richard Frost at email@example.com, ;Sofia Horta e Costa at firstname.lastname@example.org, Philip GlamannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Short sellers have been taking positions against Hong Kong, betting that the city's stocks and currency peg to the US dollar would crumble as its worst political crisis in decades plunges its financial markets into chaos.As many as 113,960 open positions held by the top 10 brokers on the city's derivatives exchange were short as of the end of September 13, representing 82 per cent of all open short positions, according to data by Hong Kong Exchanges and Clearing (HKEX).The brokers built up their position in August, when the Hang Seng was down 7.4 per cent, while the yuan's deterioration past 7 per US dollar raised hopes the city's equity and currency markets would decline further. The index, however, rose 6.24 per cent in the first two weeks of September, while the Hong Kong dollar mostly stayed within its trading band against the US currency, much to the chagrin of stock market and currency bears such as Kyle Bass, Thomas Roderick and Kevin Smith, who have been talking down the markets since last month.Such investors might have had their fingers burnt, as "they bet on the wrong side of the market", said Louis Tse Ming-kwong, managing director at VC Asset Management."It is true, we have seen large short positions in Hang Seng Index futures in August, amid the US-China trade war and protests in Hong Kong. Some might be hedging, while others might have wanted to profit from a declining market," he said.Kyle Bass, founder of Hayman Capital Management. Photo: AFP alt=Kyle Bass, founder of Hayman Capital Management. Photo: AFP"The Hang Seng Index, however, rose more than 1,000 points on September 4, and it has risen by more than 6 per cent in the first two weeks of September. Sentiment has improved so much that short sellers are the biggest losers," Tse said, adding that he did not know the trading positions of fund managers.If we assume a short seller built their short selling position on a contract mid-August and held it until Friday, a period during which the Hang Seng rose more than 2,179 points, then " theoretically " they might have lost HK$108,950 on each contract. This would mean the 10 largest brokers' clients who were short selling the contracts might have lost up to HK$12.4 billion.It was on September 4 that Hong Kong leader Carrie Lam Cheng Yuet-ngor announced she would formally withdraw the controversial extradition bill that has triggered months of protests. Her announcement also coincided with easing in the US-China trade war.Thomas Roderick of Triumph Capital. Photo: Handout alt=Thomas Roderick of Triumph Capital. Photo: HandoutOn Monday, Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, the city's de facto central bank, said short sellers would not succeed. "The financial market in Hong Kong is much bigger nowadays than at the time of the Asian financial crisis in 1998. The short sellers who want to attack the local currency will find they will need many more bullets to carry out their attacks," Chan said.The Hong Kong dollar rose to a seven-week high on Tuesday and was trading at 7.8165 against the US dollar. Its currency peg allows it to trade within a band of 7.75 to 7.85 per US dollar, or the HKMA will intervene.The Exchange Fund, the war chest Hong Kong uses to defend its currency, stood at HK$4.138 trillion (US$528.7 billion) " or 4.5 times that of 1998 " in July, while the market cap of the city's stock market stood at HK$30 trillion as of the end of August, nine times that in 1997. Budweiser taps GIC for funds in its US$4.8 billion Hong Kong IPO"We are very long on dollars, and that means we are short on Southeast Asian currencies, and we are focused on Hong Kong," Bass, the founder of Hayman Capital Management, told Bloomberg in May."The unrelenting Hong Kong protests are symptoms of bigger socioeconomic problems in China. The macro implications are huge," Smith of Crescat Capital tweeted on August 24.The bears were betting the protests will lead to capital outflows, interest rate increases and, eventually, the Hong Kong government will give up its currency peg, according to a Bloomberg report that quoted Roderick of Triumph Capital.The Hong Kong protests are symptoms of bigger socioeconomic problems in China, Kevin Smith tweeted last month. Photo: Handout alt=The Hong Kong protests are symptoms of bigger socioeconomic problems in China, Kevin Smith tweeted last month. Photo: HandoutOn Tuesday, mainland Chinese media reported widely that billionaire George Soros, who successfully broke the Thai baht in July 1997 and tried unsuccessfully to break the Hong Kong dollar peg in 1998, had sold short 200,000 Hang Seng Index futures and might have lost up to HK$2.4 billion.There was also speculation HKEX suspended derivative market trading on September 5 to foil short sellers. Charles Li Xiaojia, the bourse operator's chief executive, said at the time the suspension was down to a software bug.Soros, Bass, Smith and Roderick were approached for comment, but had not responded by the time of publication.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Global stocks edged lower again Tuesday, following one of the biggest single-day declines in oil prices on record, as investors adopted a cautious stance on risk ahead of the Federal Reserve's two-day rate-setting meeting and the start of formal U.S.-China trade talks later this week.
Exxon Mobil propped up the Dow Jones today, but stocks drilled lower as oil prices spiked and a workers' strike affected General Motors stock.
Short sellers could not successfully attack the Hong Kong stock and futures markets now like they did in the Asian financial crisis because the city's financial market is much larger and they would need "much more bullets" than they could afford, said Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, the city's de facto Central Bank.Short sellers in 1998 tried to force the government to delink the local currency's peg to the US dollar by attacking the stocks, futures and currency markets. They successfully forced interest rates to go up and stocks and futures to go down, but failed to corner the government into delinking the currency to the US dollar. Instead, the government intervened to bolster the stock market."There has been some normal short sell position, but the size is not substantial. We have not seen big short sell positions opening in the Hong Kong dollar recently," Chan said on the sidelines after the Treasury Markets Association's annual summit on Monday.Hong Kong's US dollar peg could be a weak link if protests drag on, China scholar warns"The financial market in Hong Kong is much bigger nowadays than at the time during the Asia financial crisis in 1998. The short sellers who want to attack the local currency would find they would need much more bullets to carry out the attacks, which would be too expensive for them to so," Chan said. "As such, the public does not need to worry about the short sellers' attack to the peg as they would not be able to repeat what the short sellers were doing during the Asian financial crisis."The Hong Kong dollar has been linked to the US dollar since 1983, and is seen as providing stability to the currency and the city's economy. It is now allowed to move within a trading band of between 7.7500 and 7.8500.How the extradition bill crisis threatens Hong Kong's currency peg to the US dollarDuring the Asian financial crisis, currency speculators attacked the peg by selling stocks, index futures and Hong Kong dollars in currency markets, leading to a sharp rise in interest rates. It drove the one-month Hong Kong dollar interest rate " or Hibor " up to about 20 per cent. The interest rate spike weighed on the Hong Kong stock market, and the government intervened by tapping the Exchange Fund to spend HK$118 billion to buy blue chips. The following year, the government sold its shares, making a handsome profit.But the unprecedented anti-government protests have led some hedge fund managers, such as Hayman Capital Management's Kyle Bass, Crescat Capital's Kevin Smith and Trium Capital's Thomas Roderick, to predict that a surge in capital flight from Hong Kong might force the city to drop its currency peg against the US dollar.Hong Kong protests 2019 vs Occupy Central: after 79 days, retailers, investors, developers hit far worse by this year's demonstrationsChan disagreed, however, that such a possibility is in the cards.The Exchange Fund, the war chest of the local reserve to defend the currency against short sellers, stood at HK$4.138 trillion (US$528.73 billion) at the end of July, or two months after the first major protest on June 9.That is 4.5 times more than the level at the end of 1998, when it was HK$921.4 billion.The Hang Seng Index dropped about 5 per cent from June to the end of August.But it has been on a tear of late, rising 6.3 per cent in the first two weeks of this month, largely due to improved sentiment on trade and a move by city chief Carrie Lam Cheng Yuet-ngor to give in to one protester demand and formally withdraw a highly unpopular extradition bill that originally sparked the demonstrations.In comparison, the Hang Seng Index dropped more than 50 per cent during the Asia financial crisis before the government intervened."We have not seen any major capital outflow in recent months. There are some clients asking about opening accounts overseas, but the private banks have not seen clients ask to transfer a massive amount of money out of Hong Kong. The local deposit numbers are holding up well," Chan said.He also pointed out that Hong Kong dollar has strengthened against the US dollar in recent days as the improved market sentiment has led some mega initial public offerings to resume in Hong Kong.Logistic giant ESR Cayman and brewery company Budweiser, which cancelled their offerings in June and July respectively for a combined US$11.04 billion, revived their IPO ambitions last week.The protests have pushed property prices down about 3 per cent. But Chan said that it is too soon to relax mortgage polices that are intended to cool down overheating in the property market."We will closely monitor the market. Only if we confirm there is a downward cycle of the property market would we will relax the mortgage policies," Chan added.Credit Rating agency Fitch has downgraded the rating for Hong Kong due to the unrest."We do not see there would be a big impact on the cost of funding," he said of the Fitch downgrade. "Hong Kong remains an international borrowing hub for companies. We would like to see the social order to return to normal."This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Chinese retail sales and investment gauges also worsened, reinforcing views that China is likely to cut some of its key interest rates this week for the first time in over three years to prevent a sharper slump in activity.
After months of bruising protests in Hong Kong's streets and escalating tensions between two of the city's biggest trading partners, companies are starting to feel comfortable enough to return to Hong Kong's financial markets.Logistics real estate developer ESR Cayman and Anheuser-Busch InBev both announced plans this week to revive initial public offerings that were shelved over the summer amid weak investor sentiment.Home Credit, a consumer finance lender that counts China as its biggest market, has begun speaking with institutional investors in recent weeks ahead of its planned US$1 billion listing in Hong Kong later this year. It would be one of the biggest IPOs in Hong Kong this year.Those listings, if they perform well, could open the door for more IPOs in what has been an exceptionally slow summer for the Hong Kong stock exchange.But, the question remains how long the window will remain open, particularly if the trade war between the United States and China reignites, investment strategists and market observers said."There's an improving window of opportunity in terms of investor sentiment and appetite, which I think companies will seek to take advantage of," said John Woods, Credit Suisse's chief investment officer for Asia-Pacific. "I suspect improving sentiment could extend beyond a short term 'window' and could actually shape risk appetite for the duration of the year. If that is indeed the case, I think we could see more IPOs in the coming months".Credit Suisse said on Thursday that was shifting to an overweight equity in its portfolios as trade relations appeared to thaw somewhat between the world's two biggest economies and political tensions eased in Europe. Trade war, economic gloom 'making Asian investors more cautious'The US and China have been locked in a trade war for more than a year, with Washington and Beijing placing tariffs of up to 25 per cent on hundred of billions of dollars of each other's products.But US President Donald Trump said on Thursday that he would delay a tariff increase set for October 1 by two weeks as a "gesture of good will" as the People's Republic of China celebrates the 70th anniversary of its founding. China responded on Friday by saying it would exclude imports of US soybeans, pork and other agricultural goods from additional tariffs. The countries say they will resume face-to-face negotiations next month." Donald J. Trump (@realDonaldTrump) September 12, 2019Through Friday, the value of IPO proceeds in Hong Kong fell 63 per cent to US$10.8 billion, compared with US$29.6 billion in the same period in 2018, according to data from financial information provider Refinitiv. The number of deals declined by 37 per cent to 89 transactions this year.At the same time, Hong Kong chief executive Carrie Lam Yuet-ngor formally withdrew a bill last week that would have made it easier to extradite criminal suspects to the mainland for trial. The bill sparked the protests and civil unrest that have disrupted transit and business in the city for more than three months. The protests have since evolved to broader issues, including income inequality and the affordability of housing in the city.Since news emerged the bill would be formally withdrawn, the benchmark Hang Seng Index has risen 7.9 per cent.Marcella Chow, global market strategist at J.P. Morgan Asset Management, said increased IPO activity would be "positive news" for the market, but equity values in Hong Kong still remain attractive to long-term investors."Hong Kong's equity market dynamics are largely driven by ongoing trade tensions, global growth worries and easing by key central banks," Chow said. "While the immediate Hong Kong situation remains unclear, long term investors should continue to focus on the intrinsic values of companies in Hong Kong and invest accordingly."The price-to-earnings ratio of the MSCI Hong Kong Index continues to trade at 13.7 times, below the 15-year average of 15.4 times, Chow said. The ratio indicates the dollar amount an investor can expect to invest in a company to receive a dollar of that company's earnings.Against the backdrop of the trade war and protests, Hong Kong's economy has weakened, with the city cutting its growth forecast to zero to 1 per cent for 2019. Several economists have said they expect the economy to contract this year."We expect growth to weaken materially in [the third and fourth quarter] on the back of local instability and escalated US-China trade tension," Bank of America economists Helen Qiao and Miao Ouyang, said in a recent research note. "In addition, even if business returns to normal level in the upcoming months, we are concerned that tourist arrivals and business confidence is likely to remain weak for a prolonged period."The number of tourists visiting the city dropped by 4.8 per cent in July as protests disrupts flights and transit in the city.Ringo Choi, Asia-Pacific IPO leader and a managing partner at EY, said if several of the proposed IPOs come back, including plans by Chinese e-commerce giant Alibaba Group Holding for a secondary listing in Hong Kong, it will be "very, very good for market sentiment" and help bolster the prospects for smaller companies that hope to list.Alibaba reportedly delayed its plan for a US$15 billion listing in Hong Kong last month. Alibaba is the parent company of the South China Morning Post."The general market sentiment is getting better over a short window," Choi said. "Some sectors are still better than others."But further negative news about the US-China situation could "heavily affect" sentiment, he said.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
For the first time in CLSA’s 26 years of running the event — a vital mingling venue for Hong Kong’s financial elite — fund managers from companies representing a total of $30tn in assets flew in to find fires burning outside Tiffany’s and tear gas being fired near shoppers leaving the Sogo department store. Turnout for the investor conference was down 10 per cent from last year, organisers said. Do concerns over the rule of law and banners calling on US President Donald Trump to “liberate” Hong Kong compromise its status as a key financial centre?
The Dow marks its longest win streak in more than a year Thursday, after the European Central Bank’s announced fresh stimulus measures.
Visa stock ran on the Dow Jones today, as LKQ and Activision lead as stock turn mixed early Thursday, despite a positive ECB vote and fresh trade war news.