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Is the peg safe?

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  1. #131

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    https://www.scmp.com/business/bankin...ant-first-half

    And once again the Luna Foundation Guard is being forced to liquidate assets at the worst possible time to defend the peg... Expect to see rates rise rapidly...

  2. #132

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    Quote Originally Posted by GentleGeorge:
    And once again the Luna Foundation Guard is being forced to liquidate assets at the worst possible time to defend the peg... Expect to see rates rise rapidly...
    Don't think this is accurate. The exchange funds include money from govt pension, from other government sources, and of course the original fund use for defending the exchange rate. The funds used to defend the exchange peg have always been in liquid foreign assets, i.e. most likely USD treasury... Most are held to maturity and short term MTM paper losses are less meaningful.

    Since the exchange fund includes money from pension and other sources (i.e. outsourced by the other govt depts to manage), inherently they will invest into other less liquid or volatile assets that they do not have to sell. I believe they do have around 10 or 20% in equities ..etc ... (check its in the balance sheet published).. those are definitely going to fall in value but does not indicate anything to do peg defense.

    Remember, how did the foreign money came about ? When outsiders brought in USD and sold it to HKMA at 7.75.. Now the USD rise to 7.85 and they are selling it back to those that came in 2 years ago... The process is outright money making!

    And I believe one of the largest asset allocation by HKMA is actually in an iconic commercial property... I think that property also went up 3 ? 5 ? 10 times in value over the last 20 years.. Not sure if it sits in the exchange fund but if it does, then you will expect volatility when property are revalued annually.
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  3. #133

  4. #134

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    So it's imminent
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  5. #135

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    Quote Originally Posted by freeier:
    Don't think this is accurate. The exchange funds include money from govt pension, from other government sources, and of course the original fund use for defending the exchange rate. The funds used to defend the exchange peg have always been in liquid foreign assets, i.e. most likely USD treasury... Most are held to maturity and short term MTM paper losses are less meaningful.

    Since the exchange fund includes money from pension and other sources (i.e. outsourced by the other govt depts to manage), inherently they will invest into other less liquid or volatile assets that they do not have to sell. I believe they do have around 10 or 20% in equities ..etc ... (check its in the balance sheet published).. those are definitely going to fall in value but does not indicate anything to do peg defense.

    Remember, how did the foreign money came about ? When outsiders brought in USD and sold it to HKMA at 7.75.. Now the USD rise to 7.85 and they are selling it back to those that came in 2 years ago... The process is outright money making!

    And I believe one of the largest asset allocation by HKMA is actually in an iconic commercial property... I think that property also went up 3 ? 5 ? 10 times in value over the last 20 years.. Not sure if it sits in the exchange fund but if it does, then you will expect volatility when property are revalued annually.
    Some interesting numbers released today..

    The Exchange Fund recorded an investment loss of HK$144.2 billion in the first half of 2022. The main components were:
    • losses on bonds of HK$55.9 billion;
    • losses on Hong Kong equities of HK$8.5 billion;
    • losses on other equities of HK$73.2 billion;
    • negative currency translation effect of HK$12.8 billion on non-Hong Kong dollar assets


    • gains on other investments of HK$6.2 billion

    https://www.hkma.gov.hk/eng/news-and...lf%20of%202022.

  6. #136

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    Their real estate holdings (for investment) are negligible...


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  8. #138

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    Ask and you shall receive

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  9. #139

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    Tick tock


  10. #140

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    Still OK guys

    HK$800 billion left in the bank, so can survive for another 8 years yet


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