The Potential Catastrophe We’re Ignoring
It might be at the back of your mind, but it probably shouldn’t be.
Sure, there’s glued protesters to gossip about.
And Turkey is slowly invading its neighbour…
Oh, and don’t forget that there’s been no deal between the UK and the European Union. At this stage, the UK is set for a ‘hard exit’ on 31 October. That’s less than 20 days away.
Although as your weekend editor Nick Hubble wrote recently, a hard exit probably isn’t the tragedy we think it is. If anything, it could present unique investing opportunities…
Even though it seems like a problem removed from us, the current political turmoil in Hong Kong is important to Aussie investors.
Hong Kong is a key financial hub.
And as Jim explained earlier in the year, there is a currency crisis building in the city as central bankers aren’t entirely sure which way the Hong Kong dollar currency peg should lean.
Hong Kong keeping the value of their dollar tied to the US dollar is under threat as Beijing push for a ‘soft link’ to the Chinese yuan. For investors that means the days of the Hong Kong dollar following the movements of the US dollar are numbered, as Beijing want the Hong Kong currency to follow the yuan’s movements.
But then June came…and Hong Kong was faced with a second problem.
Hong Kong citizens are fighting back against China’s threat to their democracy. The protests grow in intensity weekly.
Simply put, the people in the street are pushing for Western ideals up against Beijing’s totalitarian ideology.
Jim points out in his article today that as this battle continues to play out, people are moving their money out of Hong Kong and into Singapore. Others are working out where else they can live in the world.
And some of that Hong Kong money is finding its way into Aussie property.
The point is, those that can flee Hong Kong, will.
But the rapid drain of capital and intellect leaves the markets exposed.
Until next time,