Speculation also has the function of revealing truths that the media, or certain governments, keep hidden. Kyle Bass, one of the best known managers of the Hedge Fund and one of the few to predict the crash of 2008, has created an ad hoc fund to speculate with leverage at 200 against the Hong Kong dollar.
Kyle Bass has collected an unknown number of investors for this bet which is at a very high risk, but, given the leverage, if it works, even with a very high return. The gamble has political foundations, but is still risky. The first derives from the fact that, after the change of the fundamental law unilaterally wanted by Beijing and the demonstrations that followed, the possibility that the territory loses its favorable economic status in trade with western countries. There are already bills in this regard in the US Senate. Meanwhile, the Johnson government in the United Kingdom has promised 3.5 million passports from Her Majesty to as many citizens of the former colony, while there has been an explosion of emigration requests to Australia and New Zealand.
On the other hand, however, the Hong Kong dollar has so far proved to be a very resilient currency, indeed the Monetary Authority of the territory, its central bank, has had to enter liquidity for 40 billion HKD, 5.2 billion dollars, for keep the dollar below the fluctuation band:
So apparently the bet is a loser, and in the past Kyle Bass has lost large sums by betting, for example, against the euro or against the Yuan. In this case, however, the political situation is deteriorating rapidly and also the economic dimension of Hong Kong is not the EU, or China. Center that an attack on the Territory could lead to an intervention of the Popular Bank of China in defense and then the situation would become very heavy.
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/un-superfondo-speculativo-contro-il-dollaro-hk/ on Wed, 10 Jun 2020 06:00:29 +0000.