Saturday, March 24, 2012

Stocks DD Cites: Bill Ackman's Hong Kong Dollar bet: Nice lesson in macro


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 This is an interesting event to watch (even if on sidelines). With the option of high leverage in Forex markets, if the bet turns out to be true, Bill Ackman explains one could stand to gain x times the original investment if HKD is revalued by 30%. Hong kong's elections is today Link 
Keep in mind inflation(Link) has slowed down since Ackman made his thesis back in Sept 2011, which is bad for this bet. HKD has moved up from 7.79(09/2011) to 7.76 (03/24/2012). So it is very close to higher end of the band (7.75 - 7.85)

Long thesis-> http://www.scribd.com/doc/86588026/Linked-to-Win-September-14-2011
The 150 page titled "Linked-to-win" thesis that the peg will be maintained for stability but adjusted/revalued to control high inflation. Hong kong cannot administer its monetary policy(change interest rates) because of the dollar peg. 

Ackman seen making his sales pitch on his HKD thesis ->
http://video.cnbc.com/gallery/?video=3000045621
http://video.cnbc.com/gallery/?video=3000044951

Hong kong officials dimissing Ackman's thesis ( keep in mind one of main goals reserve bank officials  is stability. So if they ever revalue the peg, it will be a surprise event. There will be no pre-announcement)->

 http://www.forbes.com/sites/afontevecchia/2012/03/16/hong-kong-official-disses-bill-ackmans-currency-peg-call/
http://articles.businessinsider.com/2011-11-09/markets/30376277_1_chief-executive-donald-tsang-betting-housing-policy
http://online.wsj.com/article/BT-CO-20120309-700126.html 

Recent Bloomberg article on inflation and growing discontent ->Link
Another article on growing discontent & wealth gap b/w poor and rich(HK has the biggest wealth gap in Asia) -> Link 2 
Inflation slowed recently to a 10-month low ->  Link 3

Not in favor of Long thesis
http://www.zerohedge.com/news/bill-ackmans-hkd-revaluation-trade-predicted-deutsche-bank-2010-and-why-db-thinks-it-wrong

2 comments:

  1. nice posting.. thanks for sharing.

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