In February this year, we called on our readers go short on Hong Kong’s benchmark Hang Seng index as problems continued to mount of the economy, especially due to the higher interest rate in the United States and U.S. trade war against China, https://www.econotimes.com/FxWirePro-Sell-Hang-Seng-index-targeting-at-least-10-percent-decline-1166498 . Recently, Societe general published a report suggesting Hong Kong is currently the most vulnerable economy.
Since the Hong Kong dollar is pegged to the USD, Hong Kong Monetary Authority (HKMA) raises the interest rates along with the U.S. Federal Reserve in order to keep the peg stable. Since December 2015, HKMA has raised interest rates seven times with the last one being in this month. Hong Kong dollar (HKD) is allowed to float between 7.75 and 7.85 per USD and it is important to note that the HKD is trading at the lower range of the peg around 7.85 per USD since March this year. In a separate article, here, https://www.econotimes.com/Sniffing-a-peg-break-Series-HKD-might-suffer-temporary-breach-in-peg-1265373 we suggested that the HKD peg might break temporarily with a drop to 7.96 per USD.
In a follow-up review, https://www.econotimes.com/FxWirePro-Call-Review-Short-Hang-Seng-call-nears-target-final-target-extended-further-1394984 we extended the final target to 25500 area.
Thanks to the sizable selling in October, the index has declined to 25190 and the call is currently in +5990 points in the money.
As the fundamental remains unchanged, we would like to further extend our target from 25500 to 22500 based on latest calculations. We would urge readers to maintain short positions.
