Hong Kong $ 2013-16

Not a Hong Kong Architect,but a lovely bit of HK architecture nevertheless

 

 

As long time readers of this blog will know I stuck my neck out rather with the original HK$ forecast – making the claim that it would be absorbed into the Renminbi by the end of the 2008-12 period.

Clearly that didn’t happen – although many of the surrounding conditions ( wider Renminbi acceptance etc.) did.  We already know that the HK$ has become less important since 2012

  I could ignore the HK currency now as the RMB is far more important, but it is another case of I’ve started so I’ll finish. In any case there is a juicy configuration coming up over the next couple of years that affects RMB/US$ and HK$ - shame to miss it eh?

 The value of the HK$ fluctuated quite a bit in 2010-11 around its dollar peg-but as we will see that was a sign of life – no fluctuations from the start of 2012 might just be an indication of loss of interest.

2013

Despite the quarter 4 2012 speculation that the peg was going to break January 2013 was not too interesting. But February saw the creeping effects of the RMB weaken the HK$’S importance even more and start to the peg. There was little else to note in the period to March.

In April the RMB reached a record high vs. the US dollar, further influencing trade in the HK$. Another key point was reached this month.

The period May to June saw another milestone as average daily RMB volumes exceeded HK$ ones in HK for the first time. That came just three years after Beijing relaxed rules and allowed the RMB o trade in Hong Kong - Hong Kong still sees booming trade ( partly as a result of its peg and the effect US quantative easing) but there is now more than a hint that that trade won’t be in the local currency for much longer. The writing is on the wall.

 July and August saw a return to the conditions of January and February, and other economic events in Asia gave unexpected support to the life of the stable peg. It is not all good though – the combined effect of the peg and US easing has contributed to the property boom in HK too – this cannot last and a bursting bubble may be the catalyst for currency change.

 There will be little change in October, all eyes are elsewhere, yet behind the scenes things may be changing slowly.

November and December may be months for some interesting statistics and announcements. It could also be the point at which some bubbles peak.

2014

 

Although January sees another step in the direction of freeing or dissolving the HK$, nothing concrete will happen in the first quarter of 2014

Things will get more interesting in April and May, when there could be progress towards a fully available RMB. There may also be the start of more restrictions in HK which reduce trade in general. It is another key time.

After this there is a sense of wait and see right the way through to September.. There may be some excitement about the possible future changes and denials by those in authority that there are any such plans for change. It is a powerful time for money to flow.

Another phase which signifies a weakening of the bonds that tie the currency starts in October. The influence of investor interest in alternatives can’t be overstated.  

December has the feel of a calm before the storm.

2015

 

As we have seen elsewhere there are conditions in 2015 which are shouting change. Here is no exception. There are a number of signs that indicate a major shift in the currency.

January, however, seems to be holding on to the status quo albeit with a lot of surrounding pressure.

Then come three months when there is a real sense of everything being turned upside down. There are challenges to the peg and indeed background events which are opening up an opportunity to change the currency arrangements.

May sees a month of consolidation – with little progress.

June to august sees another phase where the sheer volume of money being transferred is enough to break down any barriers. The HK$’s independence is therefore under threat.

While less happens in September, there is still a significant flow of money which is creating momentum for change.

The last quarter of 2015 is key.

There is a new environment and a much more dynamic feel than in the last 2 or 3 years. A number of cycles collide and the currency peg is definitely under threat of dissolution in October, possibly due to external events as well as internal decisions.

However there may still be some difficulties as a new framework is put in place.

I am fairly confident that by 2017 the Hong Kong dollar will either cease to exist ( being absorbed into the RMB) or will be freely floating.

 2016

There is pressure even in January, as trade in the currency is reduced.

But it is from March that things take off as factors which have been building since 1991 cause a move into new territory-likely this is the dominance of the RMB.

At the same time the background factors created by the global environment which have been putting pressure on the HK$ are again at a peak now and as speculative pressure heightens it is hard to maintain the peg anyway.

 he period from June to September is characterised by control and regulatory matters. It looks like there might be one last effort to  stop the currency arrangements from breaking down. But the speculators will win, if not now by 2017.

Oct looks like being a transitionary month with not too much happening.

In the last two months of 2016, with no let -up in the pressure and its looks like 2017 starts with at least a floating HK$ if not one that has been absorbed into the greater RMB.