Ackman won't realize bet on peg: KC Chan
Updated: 2013-01-15 06:51
By Bloomberg(HK Edition)
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Hedge-fund investor William Ackman won't realize his bet that Hong Kong will amend its 29-year-old peg to the US dollar, said KC Chan, the city's secretary for financial services and the treasury.
The Hong Kong Monetary Authority has injected almost $14 billion since Oct 19 as the local currency's move to HK$7.75 obliged it to buy US dollars in the foreign-exchange market. Ackman, the founder of New York-based Pershing Square Capital Management LP, said on Oct 20 that he was keeping his call contracts on the city's currency and suggested Hong Kong revalue its dollar 30 percent higher versus the greenback to curb inflation.
"There is no question about the peg at all," Chan said in a Bloomberg Television interview on Monday at the Asian Financial Forum in Hong Kong. "He will be disappointed. I don't expect him to realize his bet."
The Hong Kong dollar traded at HK$7.7526 per dollar as of 3:30 pm in the city, little changed from HK$7.7521 at the end of last week. It touched HK$7.7532, matching a Jan 11 level that was the weakest in three months. The benchmark Hang Seng Index has risen 8.5 percent since Hong Kong made its first intervention in three years on Oct 19.
"The fund flows coming in, as I understand, are mainly for investment into the equity market," Chan said. "Some of the fund flows are there because the local corporates are borrowing in the US dollar space and China corporates in Hong Kong dollars. What we are seeing is so far quite normal for portfolio allocation and fund-raising activities."
Hong Kong linked its exchange rate to the US dollar in 1983, when negotiations between China and the UK over the city's return to Chinese rule spurred capital outflows. In 2005, policy makers committed to limiting the currency's decline to HK$7.85 per dollar and capping gains at HK$7.75.
All but one of the 20 analysts polled by Bloomberg in November, including Citigroup Inc and JPMorgan Chase & Co, said they expect Hong Kong's fixed exchange-rate system to last for at least five more years. There is no better alternative to the existing peg as the yuan is not yet fully convertible, John Greenwood, the London-based chief economist at Invesco Asset Management who was credited with designing the exchange-rate system, said at a Jan 11 briefing in Hong Kong.
Separately, KC Chan said Hong Kong will use all means to control asset bubble risk.
(HK Edition 01/15/2013 page2)