Bill Ackman, the founder and chief executive of Pershing Square, said on Wednesday that his hedge fund has a large notional short position against the Hong Kong dollar via put options.
Ackman wrote a Bloomberg opinion column in which he talked about pressure on the Hong Kong currency USDHKD, to keep the band of HK $7.75 to HK $7.85 per US dollar in the circa 2005 band.
Ackman is not the first to bet against Peg George Soros and Archchiest Chinahawk Kyle Bass in the past. Neil Wilson, chief market analyst for Finalto and Markets.com, said that the pace of Fed rate hikes may make it increasingly difficult for the HKMA to maintain the peg. Hong Kong's economy has struggled this year, recently owing to its ties to China, where COVID 19 lockdowns have weighed on the economy. The government spent HK$21.2 billion $30.8 billion in 40 interventions for 2022, despite the fact that it has defended its peg this year. The HKD traded at the weaker end of the range for most of the year but indications that the Fed might be slowing the pace of rate hikes has helped ease pressure on the band, pushing the USD to HK $7.81 from the HK $7.85 level it has traded since January. According to Wilson, it seems that Beijing and HK will throw everything at defending the peg and the pace of Fed rate hikes is about to slow down. Ackman's tweet was followed by fellow hedge fund manager Boaz Weinstein, founder of Saba Capital Management. Who said Ackman's trade was a smart lottery ticket and I also have it on. The payoff of upward of 200:1 is comparable to CDS payoffs for the default of co s like IBM over the same 6 mo horizon, though unlikely de-peg may be. Weinstein said that nothing is impossible, but only one of these is plausible.