Pop quiz - what does Hong Kong have in common with Turkey? 1) Good sea views; 2) Spicy food; 3) A currency board system.
Two days ago, one might have replied 'all the above'.
But since Turkey has been forced to float its currency, Hong Kong investors might prefer to know the differences between the two systems.
One major difference is that Hong Kong's currency board is enshrined in law. Turkey's was, as one analyst said, 'discretionary'.
A currency board is a mechanism used to back a fixed exchange rate. It requires that any change in the monetary base be matched by corresponding movements in foreign reserves.
In Hong Kong, the system is generally left to work automatically - when Hong Kong dollars leave the system, interest rates rise which should attract the dollars back. In times of crisis the monetary authority has sold foreign exchange holdings to add support and ease interest rates.
Turkey had a 'crawling peg' put in place by the International Monetary Fund, with a schedule of gradual devaluation over the next two years.