Hayman Capital Management’s Kyle Bass Thinks Hong Kong Dollar Peg Could Break

Hayman Capital Management’s CIO, Kyle Bass discussed for CNBC ongoing anti-extradition protests in Hong Kong and the US-China trade war. He said that protests are of great importance, they actually “created an existential crisis for the communist party in China”. Hong Kong is expected to fully revert to China in 2047 and considering this, it is extremely hard for the communist party to withdraw. According to Kyle Bass, continuing and growing protests could influence the course of the leadership of both China and Hong Kong, and he fears that protests are actually going to continue further escalating in violence – “they are going to stop using rubber bullets and start to use real bullets”.

A famous macro investor explained why he thinks all this could lead to 36-year Hong Kong dollar peg break. He said that off the record most of Hong Kong’s residents are planning to relocate, taking their family offices to places like Sidney or Singapore. Hence, we “are going to see a big migration of capital, and both human capital and financial capital”, and naturally, a very modest money supply, leading to exhaustion of excess capital with which they kept the peg so far.

A word on US-China trade war, Kyle Bass said that a deal is far away because the gap is too big and that both sides will continue to talk, which is good for the US economy. He thinks “that’s the path we are actually going to see going into the election”.

More details from the interview you can find in this video:

This article is originally published at Insider Monkey.