The Asymmetric Opportunity Revealed

Published on
May 3rd, 2019
41 minutes

The Asymmetric Opportunity Revealed

The Interview ·
Featuring Kyle Bass

Published on: May 3rd, 2019 • Duration: 41 minutes

Kyle Bass, CIO of Hayman Capital, sits back down with Raoul Pal in order to finally reveal the opportunity that he called “the most asymmetric trade ever seen in my entire life.” Bass follows up on his earlier thoughts on China, and lays out the logic behind his thesis. He also delves into the relevant historical context, and discusses the risks to the financial system posed by an overvalued property market. Filmed on April 24, 2019 in New York.



  • MS
    Matt S.
    1 September 2019 @ 01:02
    I watched this on YouTube before knowing it was here - 4 months after it was initially aired. Says a lot about the new Real Vision TV, to be honest.... total mess to be honest. It's a shame because this was excellent RVTV - so many good trades can come from this HK situation which I see as only continuing to worsen.
  • TS
    Tyler S.
    14 August 2019 @ 03:56
    Seems this was pretty spot on
  • ik
    ilija k.
    2 July 2019 @ 00:04
    Hong kongs USD reserves have doubled since 2008, from 150000million USD to now over 436400 million USD doesn't seem like there is a capital flight issue there? in the past few months the foreign USD reserve is actually increasing? I think Kyle's views are to one sided and do not apply the numerous measures and tools that are able to be applied these scenario's. China currently is holding over 3 Trillion USD or reserves, and is increasing not declining, 3 trillion USD is a huge amount of money. It was 4 trillion over the last 3-4 years , but 1 Trillion USD of those reserves was pumped into the western economies, hence western economies performance, since the closure of the capital USD injection into the western economies since 2017 the western economies are now forecasting slower growth, hence trumps trade concerns. Prognosis, once the western economies start to really slow China will start the capital outflow again which shall start spurring the western economies again, it's just a question of how much will China inject/capital outflow into the western economies again? I think anyone who reads into China's figures should also read into their massive USD reserves?? over 3 Trillion USD is massive it can run the global economy for at least around another 20 years.
  • NA
    N A.
    27 June 2019 @ 02:09
    The problem with Kyle is that he thinks he's the smartest guy in the room. While he's clearly smart, that just makes him a great analyst, but boy is he an awful portfolio manager.
  • DR
    David R.
    20 June 2019 @ 12:18
    Follow-up 7 weeks later. USD/HKD has collapsed as this pair now sits at a 6-month low, well into the bottom half of its year-long range, far from breaking out (and closer to perhaps actually breaking down). Anyone who took on this loser trade is bleeding money - like many of his other calls this decade. Charts don't lie! Also, what's with that ridiculous flagpin he wears? A paid puppet of the US deep state as rumoured? Don't llsten to a word this propaganda mouthpiece utters, especially about markets!
  • DS
    David S.
    3 May 2019 @ 08:29
    How long as Mr. Bass been short on the Yuan? DLS
    • DS
      David S.
      3 May 2019 @ 14:17
      Sorry, How long has Mr. Bass been short the Yuan? DLS
    • JS
      Jason S.
      3 May 2019 @ 15:15
      He went short in 2015 at the peak of China.
    • DS
      David S.
      3 May 2019 @ 17:00
      Jason S. - Thanks. DLS
    • DS
      David S.
      6 May 2019 @ 18:12
      It is strange how a simple question can be controversial? DLS
    • MZ
      Martin Z.
      10 June 2019 @ 11:09
      Some people apparently think you are commenting on KB's less-than-perfect record, DLS. (As if you had asked when he stopped beating his wife.)
  • CD
    Christine D.
    3 May 2019 @ 07:19
    I don’t understand half of how it works but Kyle sounds very convincing and confident. So let’s assume he is right and I’ll risk some money based on his words. What are the best trade ideas anyone has to play this?
    • AP
      A P.
      3 May 2019 @ 08:27
      Why would you put on a trade you do not understand?
    • PB
      Pieter B.
      3 May 2019 @ 08:43
      I just put on a long spot forex USD.HKD position which cost about 3.2% per year (Interactive Brokers). If the peg breaks to a level 30%-50% higher than that pays for the cost to hold this position a couple of years. Yet there are probably smarter ways to play this haha;) Maybe short big HK property developers such as Sun Hung Kai, Henderson Land Development & Wheelock Properties?
    • CD
      Christine D.
      3 May 2019 @ 11:31
      I am just honest. Even people who think they understand something fully usually do not. Happy for you all if you do.
    • MZ
      Martin Z.
      10 June 2019 @ 11:04
      True, but it sounds like you are just following his lead without doing any DD of your own. Not all of KB's ideas have panned out and he can afford to make some mistakes, even very expensive ones, especially using OPM. He can also afford to wait a long time for his thesis to play out. Just make sure you can as well - and good luck!
  • SH
    Steve H.
    3 May 2019 @ 16:40
    It's worth listening to Louis-Vincent Gave's point-by-point counterargument to Mr. Bass aired (free) on this week's MacroVoices podcast.
    • rl
      roger l.
      4 May 2019 @ 14:33
      Just listened to Louis-Vincent Gave rebuttal which blew me away compare to KB relatively unconvincing arguments.
    • WS
      Winslow S.
      4 May 2019 @ 21:44
      The points I thought he successfully rebutted didn't seem to me like the really weighty points. Eg did he even comment on HKMA running thru 80% of excess reserves? If he thinks that burn will cease...then why? if not...then why is that not a threat to HKD peg?
    • DR
      David R.
      5 May 2019 @ 01:00
      Also, there is an outstanding and devastating rebuttal by Alasdair Macleod reprinted on ZeroHedge (don't miss some of the comments either):
    • MZ
      Martin Z.
      10 June 2019 @ 10:55
      It's inconceivable that KB is not aware of the objections raised by both Gave and Macleod, as they (especially the latter) are not expressing mere opinions but claiming to be stating points of fact. It seems to me that somebody must be seriously wrong or misinformed here - and not just in their strategy, but in the research they are basing it on. I just wish I knew which one it was!
  • TT
    Travis T.
    4 May 2019 @ 05:18
    I'm a simple man. I see Kyle Bass I watch it.
    • JC
      John C.
      4 May 2019 @ 18:35
      me too. Great stuff. Timing is everything and I'm reticent to get into this trade but seems like 12-18 months out something has to happen.
    • MZ
      Martin Z.
      10 June 2019 @ 10:22
      I'm a simple man. I just buy gold.
  • BL
    Brian L.
    5 June 2019 @ 18:41
    I would think this would quickly become an opaque China intervention. They could print money on HK's behalf. And if HK free trade treaty were to fall apart and HK tariff's would kick in? That would could very well be kindling for a hot war... China should never have been allowed to be the major supply chain to the West.. Now they think they are top dog.
  • PB
    Pieter B.
    3 May 2019 @ 06:16
    Absolutely brilliant! Massive thanks!
    • WS
      Winslow S.
      4 May 2019 @ 21:08
      I don't understand why Kyle believes that HKMA must keep USD in reserve 1:1 (value-wise) to "back" the peg. He says people would quickly lose confidence if they didn't. Why? Does HK offer redemptions to it's citizens of HKD for USD? If so...then I guess you could have a "bank-run", but even in this sceanrio, it's never been the case that banks keep 100% reserves to avoid a bank run. Even 50% would be very high. If HK does not offer redemption of HKD for USD, then I really don't understand this statement.
    • WS
      Winslow S.
      4 May 2019 @ 21:08
      woops meant for the above to be a general post, not a reply per se
    • EQ
      Eduardo Q.
      21 May 2019 @ 14:00
      Hi Peter, Just saw that you went long USD.HKD cash on IB... if I may ask, why Cash and not CFD?
  • TE
    Tim E.
    8 May 2019 @ 00:45
    Maybe there is something to Kyle's thesis. But it seems to center on the argument that the US / HKD interest rate differential is causing hot money parked in HKD to flow out of HKD into USD. Maybe perceived political risks is one factor. But if low HKD interest rates vis a vis USD ones is the other main factor, there is nothing to stop HK banks raising the rates they pay on HKD to match USD ones. The HKMA doesn't set the banks' rates. And, as a matter of fact, just this morning HSBC has sent me a promotional email offering special, higher rates on HKD deposits. Interesting, no?
    • AM
      Andrew M.
      8 May 2019 @ 10:44
      it would blow up their property sector, no? HK has got some reprieve from Libor tracking down, since 3m Hibor (tracking 3m Libor) skyrocketed last year. A fed rate cut would help further, but there are many different threats building for the HKD as Bass points out.
    • TE
      Tim E.
      20 May 2019 @ 04:01
      You can raise deposit rates without raising borrowing rates commensurately. The banks would suffer, of course, but just saying. If HK banks have a liquidy crisis, there are things they can do.
  • BX
    Ben X.
    5 May 2019 @ 01:32
    I'm a Chinese Texan. A I strongly support Kyle Bass. Not only it's a money making move but also is a righteous bet. To bet against the Hong Kong government is not only to show our political stance against the communist party. It's a movement to tell the Chinese government that we strongly support democracy, Not the autocracy. The Chinese leadership is totally based on lies and naive of the western people. They are not trustful and please facilitate their collapse. This government will not last long. I drank a little bit, but this is personal!
    • CW
      CC W.
      5 May 2019 @ 04:10
      You sure did. I wouldn't place bet just because I hate something though. But agree w/ rest of your statement.
    • ek
      eric k.
      19 May 2019 @ 05:46
      relax and get a grip, mate. you shouldn't be posting.
  • DM
    Daniel M.
    5 May 2019 @ 21:57
    I have the upmost respect for Raoul Pal and his work, but honestly when it comes to interviewing Kyle Bass he is useless. It's understandable as they are friends, but that unfortunately leads to a one way biased interview. He is just a yes man acknowledging everything KB says. There is no counter argument and KB is never challenged.
    • ek
      eric k.
      19 May 2019 @ 05:42
      Totally agree. Raoul Pal hurts RV credibility by doing this.
  • HC
    Ho C.
    5 May 2019 @ 17:48
    Given that I am from Hong Kong, I think many people outside of Hong Kong don't fully understand the Hong Kong people's mentality and culture when it comes to property. For many generations now, we are taught to buy property because 1. It is a symbol of status and wealth, 2. It is the safest place to invest our money as it has only one direction, up. 3. It ensures the wellbeing of future generations when you pass away. Hence people like my Grandma are still holding properties which her father gave her 50 years ago. Many HK families, even those who came from poor backgrounds (literally nothing) obtained vast amounts of wealth (easily $10m USD+) following this teaching. All they do is keep buying as it improves their status and wealth of their family. Its a cultural thing. People are obsessed with property and young people/ families will do whatever to get on the property ladder. A funny reason is that many young HK girls refuse to marry men who do not own property. Thus small apartments (150- 300sqft) in new developments have on average 30 applicants per apartment because they are relatively cheap 3 - 6m HKD or 375k - 750k USD. It is almost impossible to find a decent size apartment for less than 3m USD nowadays. And Kyle refers to people being highly leveraged (85%), he refers to these young people with no money chasing these small apartments. And I agree, a small movement in the property market will screw these guys over. But theres a caveat to all this. Kyle doesn't mention about the fact the government has introduced a 15% stamp duty on 2nd properties bought after 2016 as a cooling measure. And this has major implications for wealthy individuals and families who own property. They havent been buying for almost 3 years now and are sitting on a lot of cash with very little debt. Only their heirs who don't own property are buying ulta high end properties 25m USD + with family money. And if the property market has any issue the government will just scrap the 15% stamp duty, lower mortgage requirements and the old money will flood into the market. And people will just wait out the drop and continue to buy. Its in our blood to do that. The gov revenue from stamp duty from property account for more than salary tax in HK. Its in the gov interest to keep property prices high. Btw they build around 15000 public housing rent free for low income people/ families every year, so the high property prices actually benefits them as the stamp duty pays for free healthcare, education, housing, and they get 500 USD cash a month as subsidies. Our gov will definitely step in to support the market. And about China, the people who are scared of China have basically all gone. we have 28 years until we officially become China, and people rich and poor have accepted it. 60% of our Councillors which we voted for are pro china. People ive talked to dont think this new extradition bill if passed will change anything. They still think HK is the safest place in the world, we have the best gov, a "grandfather" (china) who will protect us, low crime rates, low poverty, best political, social and economic conditions. Our sort of pact with China is that as long as they help us make money and keep the status quo, they can do what they want. So to break the HK mentality that properties are the safest/ most prestigious things to hold in the best place in the world is going to be very very tough. Given we have the HK gov and Chinese gov backing it on top. As for the peg, if anything were to happen, China will just step in to defend it, its pretty given if you ask anyone on the street. But I am interested to see what happens in the next 12- 18 months.
    • RP
      Raoul P. | Founder
      5 May 2019 @ 23:23
      For reasons like this, I love the Real Vision community. Thank you for your insight.
    • TB
      Terence B.
      6 May 2019 @ 01:44
      Very insightful. Thank you for your comment.
    • HC
      Ho C.
      6 May 2019 @ 04:06
      Thank you Raoul for your comment. Just to add on to the point of the 15% stamp duty on 2nd properties, people who own multiple properties just wont sell as long as this stamp duty is in place. Because if they sell, they wont be able to buy it back without having to pay 15% stamp duty. Its not in our nature to sell anyway, which just makes it even harder to have a run on properties. Historically, the number of property transactions are very low during down periods (even 2008), so if we see a significantly higher number of transactions during a down period, it may be a vital signal. HK property chart (for reference)
    • CS
      C S.
      7 May 2019 @ 06:01
      Are you arguing against a HKD devaluation, Ho? Measures can be taken to hold on to the peg, but 70% deval in property prices (again) if interest rates have to rise? There's no sure thing, and Kyle seem happy to wait since he's being paid too by his hedge. By the way, if the secret sauce got out, I guess it would pay less.
    • JM
      John M.
      13 May 2019 @ 04:27
      Great insight into the cultural mindset in HK. Thank you for sharing! But what happens if (or when) your second presupposition in your first paragraph breaks down: that real estate only goes one direction, up?
    • LH
      Lin H.
      15 May 2019 @ 05:18
      As a person from mainland China, I have to admit what most people in China/HK have the same thoughts as you. Notably, the people from middle-class who are benefited in the last 30 years in China's spectacle growth. However, you have to remember you that the middle classes aren't the decisive force in the market. You have to look at the rich people, probably the very rich one. As Kyle Bass said in this interview, the market would start to go into trouble when the wealthy start to lose faith in the government. (This probably is the golden rule; especially in most non-western countries which heavily rely on the very few people on the top of the pyramid). You were saying many HK families obtained a vast amount of wealth through the "property golden rule", like easily $10m USD+. Here is the question I would like to know: Are this money cashed out? Or just on-paper (like are they in real estate property? ), or in some asset management fund. You do know when the market starts to turmoil, these asset management funds would be unstable as well. It will be a systemic disaster. > Kyle refers to people being highly leveraged (85%), he refers to these young people with no money chasing these small apartments. > But theres a caveat to all this. Kyle doesn't mention about the fact the government has introduced a 15% stamp duty on 2nd properties bought after 2016 as a cooling measure. Regarding these two points, not sure if you know this quote before: "Don't let money limit your imagination". ("不要让金钱限制你的想象力"). A story I know of is that one of my mother-in-law's friends managed to get around the taxation problem by finding 'proxy buyers'. She managed to find one hundred people. (She owned a dozen of companies, and I don't think this is hard for her). She 'funded' these people with down payments and helped them get the loan from the bank. Then, she asked these people each to purchase an apartment. She would pay the mortages, and she gives some money to the person when she sells the asset. See, this is a win-win situation, the proxy received a dividend and don't need to worry about a damn thing, and my mother-in-law's friend got around the tax problem and made fortunate in real estate markets! I bet you don't want to know what leverage she is on, right? And, imagine what if the market goes down? Regarding China issue, another "famous" quote is "you are too young too simple, sometimes naive" ("图样图森迫,上台拿衣服"). Probably 99% of Chinese from the mainland doesn't understand the differences between China and Western politic structures. The worst part is that they are being taught Socialism with Chinese characteristics is more advanced than Western Politics system. (don't get me wrong here, I am not saying Western Politics system is more advanced either. It's more modernized for sure) Very sad for me to say, fundamentally, they didn't care about politics at all. All they care about is how much money they make and how many girls they fucked. (People would only start to thinking when they are in shit situation) Briefly, if you begin to look at the history of China in the last 60 years, you would understand why I am saying this. If you start to look at the previous 100 years of China's history, you would realize why CCP took over China (beat KMT) and why it will fail eventually. My reply is getting too long and start to get irrelevant to the topic, have to end here. But, in short, most of the Chinese people are empiricism which their knowledge is built on the experience which they never had a catastrophe economy disaster in the last 30 years. Truth always crashes the fantasy in the end.
  • PP
    Peter P.
    14 May 2019 @ 13:38
    Thank you as always Raoul & Kyle for your time - love being a fly on the wall on a discussion between old friends. A client just asked me to watch this interview and poke a hold in the theory. So I submit for RV comments Kyle laid out clearly the leverage in HK, the ever more authoritarian heavy hand/fist of the Chinese in HK affairs as reasons why HK wealth should naturally want to leave the HKD system, and that best of all Kyle is being paid the FX difference to wait for the coming HKMA crisis - positive carry 83 bps. I also remember 1997 & the HKMA won but the volatility was insane in equities & rates. Today Kyle says the HKMA cannot use interest rates as a tool to defend as it would burst the property market. HK will someday be part of China (it is now) but the land & law turns Chinese 50 years from July 1 1997 - so 2047 (you can argue this point, but China will decide all from 2047 onwards) The PBOC can already stand behind the HKMA & here is where that gets interesting.....Hugh Hendry in a previous RV interview claimed of the trillions (then) of PBOC investments in US Treasuries “It’s not an asset if you cannot sell it” -> Idea being that China needs to remain competitive and selling US Treasuries would strengthen the Yuan / so China cannot exit US Treasuries....but my hypothesis -> If the PBOC repo’d via Fed Member Bank of China NY branch US Treasuries & gave up 83 bps in yield (3month US t-bills are at 2.4%), they can take and fund and deliver US$ to Kyle Bass (and the world) all day, and until the US Fed cuts rates back to zero at which point these HFs will close their HKD trades at an FX loss (maybe a positive carry) but at the price the HKMA chooses. Everything else makes sense, yes highly levered, yes the best 10 years that HK may ever have, but there is no reason for this peg to ever break (China may even welcome actually selling UST to deliver here and diversify or more gold with their US$) The fact that the peg is so close to the peg 7.85 is just the HKMA & PBOC maximizing their returns (the wall does not need to “show strength”) it just needs never break (nor raise rates)
  • JB
    Jason B.
    5 May 2019 @ 00:49
    Since his big winning trades in 2008 and 2009, Kyle has been taking on larger governments and central banks with bond and currency trades. These governments and central banks can change the rules, move the goal posts and covertly and overtly do bailouts to stop his trades from working out.
    • HJ
      Harry J.
      14 May 2019 @ 05:39
      They may have more pressing issues to deal with.
  • MF
    M F.
    12 May 2019 @ 15:42
    Good interview. Always like to hear interesting and contrarian ideas. Would like to hear KB's reply to several comments below differentiating between the HKMA's reserves and aggregate balances, with the former being much much larger and more relevant to the discussion vs the declining aggregate balances. I would also be curious as to what the Central Bank reaction function is on these fundamental pressures...namely, the currency will be seen as a sovereign issue--as a currency is viewed as a country's share price in some circles--so in all likihood the PBOC, other Asian Central banks, and indeed perhaps the Fed, will issue dollar swap lines to defend the currency, as they have indicated they would in the past (not to mention the Chiang Mai Initiative formed by Asian central banks after the AFC which does something similar with $4T in reserve firepower). Sure the peg may go long-term for the correct reasons KB mentions about it being out-of-date/out-of-sync with the current trade flows, but to the extent that CBs around the region (and the world) have a vested interest in suppressing volality in all forms lately, I would think the peg may survive until much later down the road, then as determined by domestic capital flows and/or speculators. Perhaps the best way to play is buying to some options in size and playing for a vol spike, without the deval per se. Agree with Raoul if the peg did break, there would be many related trades. The only thing I wonder is if the peg goes does HK equities go up or down...when the Thai baht broke 2 July 1997 equities rallied. Obviously in dollar terms no so, but if you are short futures with currency shorts, you could get hurt, somewhat counter-intuitively. Admittedly, Asia pre-Thai devaluation had already seen a fall in equtities from 1994 onwards unlike HK now, but it was a surprise to most to see Thailand rally on the day and days after the deval.
  • BD
    Bryan D.
    8 May 2019 @ 04:57
    There seems to be confusion here between aggregate balances (HKD) which have shrank by 80% and FX reserves (predominately USD) which are near their record highs of USD440bn. Aggregate balances are the excess HKD cash in the system once all payments are settled for the day by the local banks with access to the HKMA. The HKMA has control over this number and it is independent of what happens to the currency. It is natural that it is shrinking as they track US monetary policy and the Fed balance sheet is also shrinking They can inject their local currency cash into the system just like any other central bank can to maintain a functioning market whenever they like. They don't have to inject enough to allow speculators to have a big carry pick up attacking the peg. No central bank would let the excess cash in their system go to zero as payments have to be made everyday and intraday liquidity managed. Unfortunately this seems to me to be grossly misunderstood here or an advert to for an event driven fund that probably won't pan out for the investors but will for the fee charging fund managers.
    • HO
      H2 O.
      9 May 2019 @ 02:07
      Right on. Totally misrepresented how the aggregate balance functions.
  • PP
    P P.
    6 May 2019 @ 14:50
    KB last good trade was probably sub prime crisis (maybe he was lucky), then came short Japan JGB that ended in tears. Not sure what his returns have been like post financial crisis. Maybe he is a one trick pony like Paulson. But definitely interesting to watch.
    • WS
      Winslow S.
      7 May 2019 @ 12:33
      I thought that too, but actually even his Japan fund was net profitable, bc they made such highly assymetric bets on yen devaluation, which did happen by 15-20% in a rather short amount of time. Japan was the least profitable of his special purpose funds though. it's very different to take this as trading advice and try to do trades yourself than to invest in his funds. different because you probably don't have access to the same level of assymetric bets, eg options on HKD.USD. makes a big difference.
    • AM
      Andrew M.
      8 May 2019 @ 10:35
      correct. most people would just long USD/HKD in a vanilla trade, and your upside would be capped at 20-40%. for something that might never happen for the reasons outlined by Louis Vincent-Gave and others. or buy USTs, and again your upside is relatively capped. Bass' trade would likely be using the different rates (+ carry) and what HK investors have been doing (HKD- for some time now), to fund options on USD/HKD. So a low-risk positive carry trade to fund his highly asymmetric trade (50-100+% gains). all about how the trade is structured. Carson Block actually is actually doing something similar Tesla in a way - buying the high yield bonds and using the coupons to fund highly asymmetric out of the money puts options (i.e. BK) that he can just keep rolling over.
    • AM
      Andrew M.
      8 May 2019 @ 10:40
      He's actually had some good trades since then too - Greece and Argentina come to mind. And he has a good track record when it comes to currencies, rates, etc (go back and listen to his other interviews with Raoul, including his 2017 interview). he's also outperformed the S&P since inception. but being Event Driven, he focusses on highly asymmetric macro bets (i.e. one-way bets) like fx pegs (trades that Bacon and Tudor Jones are shying away from because they need institutional capital). it's super interesting and you only need to have a few big wins to outperform the stock market.
  • CS
    C S.
    7 May 2019 @ 06:05
    Kyle mentioned not wanting to be exposed to HK HSBC and Standard Chartered equities. Would he care whether he had funds - foreign currency (not HKD) deposits - with these banks in HK? How about deposits in other/local HK banks?
  • MG
    Michael G.
    6 May 2019 @ 13:45
    Interesting to see the SCMP post this morning...the video has clearly gotten some attention: Hong Kong now has a giant war chest for defending its currency Only thing I wish the post touched on more was the geopolitical angle of how China could (likely will) step in
    • CS
      C S.
      7 May 2019 @ 05:48
      So they have a lot of HKD, you mean?
  • Nv
    Nick v.
    6 May 2019 @ 10:45
    His numbers on HKMA reserves are miles off. Not $6bn but > $400bn in FX reserves Not an imminent threat. The 1992 Treaty is interesting
    • NF
      Nicholas F.
      7 May 2019 @ 05:38
      HK fx reserves were >hk$400bln back in 2013. Today, that number is closer to hk$ 54bln. Kyle talks about the aggregate balance:
  • MF
    Martin F.
    6 May 2019 @ 17:32
    Good Trump-trade-war-propaganda. Nothing more, nothing less. A killer trade? Kyle struggles to sell the story after years of being early/ wrong. Bring on Jeff Snider if you want to understand the Chinese situation
  • MB
    Michael B.
    3 May 2019 @ 18:32
    Maybe its not as glitzy but why not long dated puts on the EWH?
    • YW
      Yowshi W.
      6 May 2019 @ 14:35
  • DS
    David S.
    6 May 2019 @ 14:27
    What a great discussion on RVTV. This is what it is all about pro and con. A special thanks to our Hong Kong friends for their deep insights. Thanks to everyone for their comments. DLS
  • WC
    Wilson C.
    6 May 2019 @ 05:11
    HK SCMP article on this bet, explains the FX reserve coverage (as in Louis Gave charts as well).
    • SB
      Sunil B. | Contributor
      6 May 2019 @ 08:50
      I had to point this out about the author
  • JC
    Joel C.
    6 May 2019 @ 08:48
    yikes... probably the most hard hitting piece i have seen yet on RV... and as a founding member that's saying something ... mind you as a HK resident, when HF titans start talking about your home as a 'trade' you have to start to worry... even just a little bit.
  • SS
    S S.
    3 May 2019 @ 11:43
    Macau's currency is pegged to Hong Kong Dollars and in the casinos there they only accept/use Hong Kong dollars. An obvious trade may be to short casinos listed in the USA - Wynn Resorts, Las Vegas Sands, MGM Resorts etc.
    • DB
      Douglas B.
      3 May 2019 @ 15:39
      Can someone explain this to me?
    • SS
      S S.
      3 May 2019 @ 15:51
      @Douglas. Macau - The largest gambling center in terms of revenue in the world (6x Las Vegas) only accepts Hong Kong Dollars in its casinos (The Macau currency is pegged to Hong Kong dollars). Wynn Resorts, Las Vegas Sands get 50-70%+ of their earnings from Macau. If the Hong Kong Dollar/US Dollar currency breaks the peg, the Hong Kong Dollar will go down sharply and hence the US casinos with operations in Macao will have their profits/earnings slaughtered. Also as the Chinese economy slows down, casino revenues in Macau will most likely fall too so shorting US casinos is also a play on that.
    • DS
      David S.
      3 May 2019 @ 17:17
      One small point. Macau/HKD peg could break if there were a HKD crisis. It would be interesting if Macau would establish a peg to the Yuan. DLS
    • DY
      Dmytro Y.
      4 May 2019 @ 09:24
      Steve, most of money spent in Macau are from Mainland China and not from Hong Kong. It’s mainland Chinese people coming to gamble. Not so much HONG Kongers.
    • SS
      S S.
      4 May 2019 @ 11:11
      @Dmytro. It doesn't matter where the HK Dollars come from where it be from Mainland China or Hong Kong. The casinos in Macau only accept Hong Kong Dollars. The US Casino operators there will take a massive hit on their earnings/profits if the HK Dollar/US Dollar peg breaks as their reported earnings/profits in US Dollar terms will fall drastically.
    • RR
      Raj R.
      5 May 2019 @ 18:07
      Yes this makes perfect sense!
  • WC
    Wilson C.
    5 May 2019 @ 07:37
    I had to spend more time digesting this Kyle Bass video than other RV content, given I have lived in HK (and still live here) since mid-90's (living it directly), and have respect for Kyle's analytical data/thesis. Have followed Kyle Bass since the2007/08 MBS bet, lately I have less confident in his investment ideas (the ones he's shared publicly) on Japan (currency) and now China, and it's less about what Raoul mention at the end of the video about bets not working out, but more about why he picking investments that need to "fight" the momentum of countries or central bankers. Maybe he wants to be George Soros (bet against the UK pound in 92). He's placing bets against Govt's/Central Bankers (Japan & China), which (to me ) is risky, back to the "don't fight the FEd" and trade ahead of and not against. CB's have shown they can/will implement policies outside of normal policies, even negative interest rates. He appears to mix politics/personal opinion with the China investment thesis. I watched this video, another interview with Kevin McCullough on Hedgeye (thanks to Dmitry Y to flag this to me) available on Youtube, and Louis Vincent Gave's rebuttal interview on Macro Voices. In conclusion, I agree w/ Louis Gave and other commenters below that I don't think this bet against HK will work out for Kyle. I agree w/ LV Gave's thesis, even more so as Louis also lives in HK and is more in tuned with HK market. Interestingly, I think Raoul also wasn't convinced about this trade, but he was (nicely) asking probing questions rather than to directly challenge Kyle, very smooth Raoul :-) Some additional points to consider for this trade: HK Peg, 9X GDP, Highest Property Prices, Flight of HKD to USD/Leaving HK, Extradition Law **HK Peg. - It wouldn't surprise me at some point in the future, the HKD is peg to SDR or RMB, ie to Kyle's point it makes more sense to align the currency to where the growth comes from. But this would be done within a long term strategy (China) with a high stress breakpoint providing the opportunity for China to make it's move (and get the support of the HK people). - He under-estimates the resilience of the HK people to "suffer" through difficult times. To his point, HK can raise interest rates to slow money outflows. It did in 97'ish, and as he mention property values dropped 50-70%. BUT, most people continued to pay their mortgages and didn't default... whereas in USA, Canada, AUS, there would/has been a higher default rate where people walked away from their homes. So, if there was a crisis, HK people will endure the pain of govt actions as much as they can. - HK People have a high savings rate. Anecdotally i hear lots of people waiting for the property market to drop so they can invest their cash savings. **HK Economy / 9X GDP Debt Ratio - agree w/ Gave that focusing on economic activities (shipping port, manufacturing) is wrong, HK moved mftg to south china years ago, and stop relying on shipping as well. HK is all about finance and services, most of the early developments in China leverage HK skills (architects, $$, expertise, property). for example, Shanghai's Xintiandi area (ie, their version of HK's Lai Kwai Fong) was developed by Shui On Land (one of HK's property developers). - Also agree, comparison should be to other financial centers, ie, London or NYC, rather than to compare 9X HK GDP to USA or Japan (misleading comparison). - Comparing HK to Iceland or Cyrus is fearmongering. HKMA has a decent track record, not to say things can't change but don't think that's a fair comparison (like comparing Singapore to Zimbabwe, no offense intended) **Property Prices - definitely crazy, highest in the world but it's hard to see when/how this will break downwards apart from a global recession. Besides the low interest rates, there has been china money support in that if you were a rich China multi-millionaire, you would want to own at least 1 HK property (diversify). Apparently there is at least 1.6-2M millionaires in China, if 50% own 1 property in HK, that's 1 M units... same problem Vancouver, Sydney, London etc have with chinese money, it's an insurance policy that has skew property for local owners. - personally, I would love to see property prices reset in HK, but I don't see any catalysts. - if mortgage rates go up, or property prices drop, the most likely scenario is like 1997 (HK owners have been through it once), people are just going to tighten their spend and pay off the mortgages even at (heaven forbid) 15% interest rates. ie, no major crisis in the financial system for the banks, ie, their loan books won't have a crazy default rate. ** Flight from HKD, Leaving HK: - Personally, haven't seen any indication of anyone thinking to leave. Back in 97 Handover, there everyone was getting Canada, AUS, NZ, USA passports and concern about the handover. Definitely don't sense this in HK today, flight of people/capital. maybe those that have more reasons to (insider trading, dirty business) definitely due to the clampdown on corruption in China (even within their own party ranks) but the average person... not so much. - No need to "buy" USD, HK people trade / invest in forex fairly common, due to interest rate differentials, ie, CDN, AUD, NZD, Pound, Euro etc.... and buying property worldwide :-) yes, like the chinese, raising property prices for local residents. ** Court of Law, Extradition - definitely a concern with the new extradition law, but the govt has done a poor job of explaining it and/or making it safer for HK people. There's a need for such a policy, just look at the Huawei exec extradition from Vancouver/Canada to USA, such is needed between countries. I believe the "real" issue is people have a mistrust of China and chinese rule of law/courts rather than that such a law should not exist. - Personally I see people with high confidence in HK's court of law/system, it's been fairly stable since the handover. Where else in the world do you see police officers jailed as well as protesters per Occupy Central actions from 2014? I can't recall cases in USA where police are jailed (and in HK, it wasn't even for shooting people). - agree w/ Gave there's nothing to gain for USA on this, except maybe to negotiate a better trade deal. otherwise, nothing to gain = won't pick this fight. If you do plan to trade this asymmetric opportunity, hope this helps and good luck. I'll pass on this as I think there are less riskier investment opportunities than China, HK, or Japan :-) Thanks for reading!
    • KJ
      Keith J.
      5 May 2019 @ 07:52
      I also listened to Louis Gave’s rebuttal. I don’t think he addressed the issue of the dwindling reserves which I would like to see explained further. For me the bet of the peg breaking is a bit different to the world falling in, HSBC needing a bailout etc.
    • WC
      Wilson C.
      5 May 2019 @ 08:16
      Hi Keith. There’s a chart pack that you can download with Gave’s MacroVoices interview. I’ll have to look at it again, but I thought he has a chart that looks at more than just the Reserves and the “buffer” was not a concern. Will take a second look, good point
    • WC
      Wilson C.
      5 May 2019 @ 08:26
      Also wouldn’t HKMA just raise interest rates to defend the peg if they need to? I would think this would be a logical thing to do. Property prices and HK people will suffer the consequences but there’s no reason to think the people won’t since they did it already once back in 97’ish?
    • VC
      Vince C.
      5 May 2019 @ 10:49
      I agree Wilson. Kyle’s a smart guy with interesting perspectives but by all indications he‘s never even stepped foot on Chinese soil (based on his comments) and possibly even HK at that...
  • DS
    David S.
    3 May 2019 @ 18:52
    It is nice to have more detail but this trade is not a revelation. Mr. Bass, discussed this in October 2018 with Miles Kwok - "KB: Right, but it's very bad. But when you go back to Hong Kong, Norman Chan and the HKMA, they've spent 78% of their excess reserves fighting the peg. This peg's been in place for more than 30 years. And now Hong Kong imports US monetary policy, so they're having to raise rates, while China's economy slows down. This could be a very big problem for Hong Kong, yeah?"
    • DR
      David R.
      5 May 2019 @ 09:40
      Good to see that I wasn't the only one wondering that. Same old car with just a redesigned hood ornament and a new name & ad. If you're a big dollar bull, it looks good, but if you're not, then maybe look elsewhere.
  • WC
    Wilson C.
    5 May 2019 @ 07:40
    apologies for the lengthy post, i think I tend to post long or not at all one more point, if HK govt is short on money or worried about funds, i wouldn't think they would give $$$ back to HK citizens, how many countries give free cash :-)
  • SC
    Stanley C.
    3 May 2019 @ 21:36
    Tough trade for Kyle as Chinese government loves USD more than RMB. Chinese RMB is not a tradable currency. China needs Hong Kong to attract global deposits to fund the Chinese companies. Hong Kong has no capital control, no inheritance tax, no capital gain tax, no sales or value added tax, 15% income tax with 16.5% corporate tax (no cap on entertainment expenses). Partially contributed by our pension, Hong Kong attracts US$1.7 T bank deposits vs. America US$30T. The Chinese government trick is to use Chinese RMB back assets to obtain USD denominated loan. For case like Huawei to receive US currency denominated loan, the local banks HSBC, standard chartered bank accepts Huawei’s China asset such as real estates and RMB deposits to back lending with Bank of China guarantor. Bank of China takes care of the due diligent processes. As soon as the assets are “Healthy”, there will be continuing US dollars cash flow for Huawei. HKMA, local banks and we all know they are not recoverable asset in case of default. Local banks have no legal way to put a lien on China’s assets, not to mention judicial procedures to recover them. Kyle’s trade might work if 1. US terminates Hong Kong Policy Act, treating Hong Kong like China; it means same tariff, high tech export restriction. 2. Exposing the Chinese State-directed accounting frauds, Moody and S&P starts downgrade Hong Kong banks due to their assets quality.
    • YW
      Yowshi W.
      4 May 2019 @ 17:12
      Perhaps KB already knows
    • DR
      David R.
      5 May 2019 @ 00:13
      Plus China has most of the world's physical gold now in reserve with which to backstop HKMA if desired, or alternatively, with which to launch a counter-attack and destroy the value of the US currency and US financial system (as it is questionable whether the US and UK have any remaining physical gold anymore; just worthless paper derivatives). Never forget the golden rule: he who has the gold makes the rules.
  • WM
    William M.
    4 May 2019 @ 23:25
    Wealthy people have been leaving countries like China/HK, Russia, Venezuela for years... I'm not sure that's an accurate way to time a macro trade on a crisis in any of those places (though I realize Kyle's got many other excellent indicators etc.).... When wealthy people return to their home countries and invest there could be more accurate (as a bullish change), as may happen at some point with Venezuela... Excellent video.
  • ST
    Simon T.
    4 May 2019 @ 04:58
    Good interview even though not quite new with exception of the extradition law; then again, look at what happened to Julian Assange, that's even more scary Then again on the household debt, it has barely moved between 2000 and 2018 at around 60 to 70%. HK has the 4th highest savings rate after Singapore, Switzerland and Japan. HK household wealth stands at over 12 times liabilities, even if property would crash 50% that would still be more than for US or UK households. Household debt has risen half only of the rise in property prices between 2009 and 2018. Mortgage debt-service is at 30 years lows but i agree that this could quickly change should interests go up. If HKD interests should go up i d rather expect a property correction than a HKD risk. Perhaps property will be down over 30% but what if HKD pegs with RMB on a 1:1 basis, that's roughly 12% upside... it would make HK savers and middle class tenants feel good and add stability to the Greater China system... it is very much a possible outcome ...
    • JC
      John C.
      4 May 2019 @ 18:58
      Good points all. I'd have to imagine that there is a massive black market in HK as well allowing people there to preserve wealth in different ways, and that most of these ultra wealthy already took a ton of money out and just live between two worlds by an large anyway.
    • HO
      H2 O.
      4 May 2019 @ 20:23
      KB cherrypicks data to suit his thesis.
    • SB
      Sunil B. | Contributor
      4 May 2019 @ 22:29
      The household wealth of 12X is average ( which is a problem in a city where income disparity is the extreme) and included property which has done very well since 2003 SARS episode. The mortgage service on a 455 sq ft flat with 70% mortgage requires 69% of income at current HIBOR level which is 45 bps below LIBOR
  • AA
    ALI A.
    4 May 2019 @ 18:45
    What if China backstops the peg
    • SB
      Sunil B. | Contributor
      4 May 2019 @ 22:22
      Possible but requires backstopping banking system which is about ~$1.6 trillion
  • CE
    Christian E.
    3 May 2019 @ 10:57
    Great interview. Kyle is articulate, does deep analysis and has a great grasp of macro. The biggest flaw in his argument is the assumption that China does not backstop the HK. In the interview he points out the relationship is more integrated than ever. China is a major investor in HK real estate, HK is funding mainland investment etc. China is moving to open its capital account, attract foreign capital and position the RMB as an alternative reserve currency to the USD. Rightfully so with a ~14tn economy. The last thing Chinese leadership wants is regional volatility during this transition.
    • RS
      Ruben S.
      3 May 2019 @ 13:09
      agree 100%. Could we get Raoul or someone to ask Mr Bass the question, as it could at least really change the time horizon of this view. Besides, would be interesting to know if he did the same analysis for China+HK as a whole in terms of leverage and see if this picture makes more sens (or not).
    • DB
      Douglas B.
      3 May 2019 @ 15:43
      Ask Kyle on Twitter....@Jkylebass
    • WS
      Winslow S.
      4 May 2019 @ 21:49
      agree. also didn't address WHY the HKMA can't use it's USD reserves (not merely EXCESS reserves) to defend the peg. he gave a hand-wavy statement that it would undermine confidence. I don't understand why.
  • GA
    Guy A.
    3 May 2019 @ 11:51
    Bill Ackman made the same call a few years ago for all the same reasons so you have to believe in an additional trigger to make this happen. Perhaps that’s the business cycle. If this current soft patch follows though to the downside in the coming months this call is more likely to happen. If we reflate or muddle though it’s probably postponed until a more moderate to severe recession finally occurs.
    • WS
      Winslow S.
      4 May 2019 @ 21:46
      It's the housing market turning over. there was a graph of it somewhere in the talk
  • RE
    Richard E. | Contributor
    3 May 2019 @ 19:04
    Having also be living and trading in Hong Kong in 1997/1998, there are battle scars from HKMA that are very real. However, I think Kyle makes a compelling case that there is less ability to withstand the pressure now. Also, I think the point brought up that HKD could be re-pegged to CNY is a very real possibility and been on my radar for years. The Chinese government just needed the right crisis to bring the re-peg about.
    • WS
      Winslow S.
      4 May 2019 @ 21:42
      If they re-pegged, do you think they would raise, lower, or keep the same the HKD value?
  • HO
    H2 O.
    3 May 2019 @ 21:58
    KB misrepresents the functioning of the aggregate balance. It is true that HK has seen a base money shock because people are converting to dollars. Base money shock plus massive real exchange rate overvaluation is always very bad. But, also have to look at HKMA’s official reserves, which have continued to rise, which indicates steady net inflows.
    • WS
      Winslow S.
      4 May 2019 @ 21:39
      Interested in learning more. Eg if they accumulated Ts, would that affect reserves but not base money?
  • AG
    Abhimanyu G.
    3 May 2019 @ 23:04
    a significant number of Asian private banking clients are already in this trade - they are funding their levered USD fixed income portfolio using HKD loans instead of USD loans
    • AG
      Abhimanyu G.
      3 May 2019 @ 23:07
      albeit not for the same reason - they are trying to take advantage of the differential between hibor and libor in a pegged current where downside risk is limited to 7.75 in their opinion if the trade goes the other way
    • WS
      Winslow S.
      4 May 2019 @ 21:37
      How is that not for the same reason? Kyle's trade gets the same positive carry for the exact same reason. positive carry with potential big upside.
  • MU
    Mo U.
    4 May 2019 @ 18:51
    Kyle has been wrong with the China bearish trade for years now. No matter how good an investing thesis is, if you get the timing wrong, you are wrong, sorry! Reminds me of Jeff Gundlach with his bearish bond trade. It's all about timing in the markets! I am surprised RV continues giving so much credibility to these guys than think they can outsmart the markets.
    • WS
      Winslow S.
      4 May 2019 @ 21:33
      Not exactly true in this case, as keeping the trade on is currently paying net positive carry. Im an LP and got an annualized 10% return last month, despite HKD slightly appreciating.
  • RQ
    Randy Q.
    4 May 2019 @ 17:37
    Very interesting. I would like to think I have learned to follow the money. I would love to know if there is a way to track or measure the # wealthy family's (rich people) that are relocating. I think KB has a solid argument. I just fear that HK can kick the timing out much longer than most think. However if there were a currency fire to start somewhere else then the HKD could quickly ignite like a very dry powder. Knock-on impact to USD, Gold, Crypto currency?
  • BH
    Bin H.
    4 May 2019 @ 02:26
    Hong Kong dollar peg has its political interest. I cannot find any reason why China will not support Hongkong dollar in any circumstance except for very bad recession or Hong Kong's losing special status with US. If bad recession happens, you can short AUD, CNH or HKD, not much difference. So I think shorting HKD is about betting against the Hong Kong - US agreement. Honestly, I do not see high possibility of big crush of HKD alone.
    • SG
      Siebe G.
      4 May 2019 @ 03:03
      Because unhappy people want change.. a deep recession in HK, might open up HK people for other thoughts.. For example hating the Chinese a bit less..
    • RK
      Robert K.
      4 May 2019 @ 07:55
      Because they will be able to step in as saviors and take it.
  • RK
    Robert K.
    4 May 2019 @ 07:54
    Amazing stuff of course. Let’s not forget that the Mainland will actually benefit from any economical turmoil in HK since they will step in as saviors and will finally swallow HK attaching it to the rest of the unlucky police nation.
  • DF
    Dominic F.
    3 May 2019 @ 10:17
    I'd say a lot of these HK Chinese are the proud owners of empty properties in Sydney and Melbourne, Australia. Waiting.
    • DC
      Dave C.
      3 May 2019 @ 23:31
      And empty properties in Auckland
    • MK
      Mike K.
      4 May 2019 @ 04:11
      And empty properties in Vancouver...
  • GT
    Guillaume T.
    4 May 2019 @ 01:16
    Really Curious to seek how it's going to turn out Vancouver. Interesting talk. Thanks.
  • TM
    Timothy M.
    3 May 2019 @ 21:14
    I enjoyed the interview. The figures are truly amazing when you compare the HK banking system to the US. They are at 850% of GDP vs. the US at about 75%. $10,000 is an average price/sf in HK and the borrowers are highly levered is scary. I trust Mr. Bass is right about this playing out in the next 18 months.
  • PW
    Peter-Mikael W.
    3 May 2019 @ 21:08
    Gret interview but what I really want to know is. Where did you get that lamp?
  • DS
    David S.
    3 May 2019 @ 19:25
    The Hong Kong dollar is certainly at risk and has been for a long time. One should look at what will happen when the Hong Kong dollar is gone. HKDs may be converted to RMBs in a crisis of China's choosing. This will stop major outflows of currency from China and bring Hong Kong sovereignty under China – a long-term goal. The drop in HK housing prices will not be a concern to China. The timing may have a lot to do with US trade war with China, i.e., tariffs. If the trade agreement between the US and Hong Kong is not renewed, there would be no reason for China not to make big changes in Hong Kong's sovereignty. The trade may be the same, but it would be interesting to see effects of the HKD pegged to RMB, and then the elimination of the HKD all together. The knock-on effects may be even more interesting. Timing is most important as always with China. DLS
  • KL
    Kenneth L.
    3 May 2019 @ 09:46
    I think USD is a better short than HKD or CNH. Sorry to say this, if anyone follows his recommendation of shorting CNH n HKD, you would have loss alot of money.
    • JC
      Jack C.
      3 May 2019 @ 12:39
      I don’t sense that you will lose a lot of money shorting HKD against USD. HKD is currently pegged to USD with a narrow band and is hitting against upper band of 7.85. If HKD were to strengthen lower band of 7.75, that’s a 1% move against you. Even if you factor in interest rate diff, if your base case is that peg remains, your downside is pretty much limited...
    • WS
      Winslow S.
      3 May 2019 @ 18:17
      I'm invested in this fund, and it's been positive yield for months now. I'm making 3x - 4x USD money market rates while having this upside exposure.
  • FA
    Frank A.
    3 May 2019 @ 17:55
    SCMP: Chinese Banks Quietly Lower Limit on Foreign-Currency Cash Withdrawals
  • DD
    Daniel D.
    3 May 2019 @ 16:34
    Very interesting and thoughtful. Particularly towards the end there was some dialog with regard to potential knock on ramifications and the conversation was centered mainly around the region. My question to Kyle/Raoul is with the magnitude of the thesis described, does this have the potential to be a larger Black Swan that precipitates an even larger global reaction that acts as the long awaited reset of the global markets.
  • JS
    Jason S.
    3 May 2019 @ 15:13
    Kyle Bass' argument makes plenty of sense - get ready for the HK peg to break. Carrie Lam is pro-Beijing and has set HK on a path to 'legally' hand it to China via her legislative ideas. She is in China's pocket and is doing whatever she's told like a good puppy dog. China seeks dominance of the region, recapturing both Taiwan & HK. It will likely engage in war to obtain Taiwan. But most likely this will happen next year. When HK runs out of money, China will be there with open arms to bail it out and re-peg its currency to the yuan. I have made this comment before on Real Vision. I won't be surprised if HK peg breaks in January 2020, inline with Martin Armstrong's ECM. I also wouldn't be surprised of Felix Zulaufs view when China will decline into 2020 and double down in 2021 and 2021 happens to celebrate the 100th year anniversary of the Communist Party and Xi Jinping's reelection. The stimulus will likely be to finance the military operations to take on Taiwan, backed by the western establishments. This is a scary future we face. But if we trade the trade one step at a time. Hopefully we can get through it with some sanity.
  • JS
    J S.
    3 May 2019 @ 07:49
    Very interesting. Listened to LVG’s counter argument to Kyle’s thesis on Macrovoices last night before watching this interview. It is difficult to disagree with their arguments, but I think Kyle presents a good risk/reward trade ... I just need to find it! I have an account with LCG, so only think I can short HSI or Hong Kong ETF if that’s the right trade.
    • CS
      C S.
      3 May 2019 @ 14:43
      If the currency depreciates by 30%, do you think the assets denominated in that currency will go down in HKD?
  • GS
    Gregorius S.
    3 May 2019 @ 11:45
    Saw the spread 3m HIBOR to 3m LIBOR spike to levels that were close to 3 standard deviations in 2018. Was this mainly part of the HKMA burning through the FX reserves or the just LIBOR OIS blow out?
  • CT
    ChiuSing T.
    3 May 2019 @ 11:39
  • DR
    De R.
    3 May 2019 @ 11:28
    I think he said something about south east asia in the previous interview, and now continues talking about hk, either way I doubt the US administration would label hk as China since Trump would not want to spark fears in the markets. Unless something breaks down in trade negotiations, this remains a low probability event. A more possible scenario is growth continues to slow and the dollar continues to rally, that would hurt hkma big time.