Hong Kong’s financial war chest is big enough to withstand any 1998-like short sellers’ attack, says monetary authority’s chief
- Hong Kong financial market is much bigger two decades later, making it too expensive for short-sellers to successfully attack
- No evidence of big capital flight due to protests, Chan says
Short sellers could not successfully attack the Hong Kong stock and futures markets now like they did in the Asian financial crisis because the city’s financial market is much larger and they would need “much more bullets” than they could afford, said Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, the city’s de facto Central Bank.
Short sellers in 1998 tried to force the government to delink the local currency’s peg to the US dollar by attacking the stocks, futures and currency markets. They successfully forced interest rates to go up and stocks and futures to go down, but failed to corner the government into delinking the currency to the US dollar. Instead, the government intervened to bolster the stock market.
“There has been some normal short sell position, but the size is not substantial. We have not seen big short sell positions opening in the Hong Kong dollar recently,” Chan said on the sidelines after the Treasury Markets Association’s annual summit on Monday.
“The financial market in Hong Kong is much bigger nowadays than at the time during the Asia financial crisis in 1998. The short sellers who want to attack the local currency would find they would need much more bullets to carry out the attacks, which would be too expensive for them to so,” Chan said. “As such, the public does not need to worry about the short sellers’ attack to the peg as they would not be able to repeat what the short sellers were doing during the Asian financial crisis.”
The Hong Kong dollar has been linked to the US dollar since 1983, and is seen as providing stability to the currency and the city’s economy. It is now allowed to move within a trading band of between 7.7500 and 7.8500.