Thread by @bauhiniacapital

People need to take a chill pill and @Jkylebass needs to understand how money works in HK.

1) There is a US$10bn IPO which launched yesterday and prices/closes in one week.

Big IPOs take money out of the system. Big and popular IPOs take a LOT of money out of the system.

https://twitter.com/Jkylebass/status/1146650099495424002

2) This is not new. It happens again and again. EVERY decent professional investor who knows the HK market and monetary system will have observed this. Again and again.

HKMA wrote a decent paper on this 10yrs ago. Method is described within (p2 onward).
hkma.gov.hk/media/eng/publ…

3) There is no "lawlessness." If HIBOR O/N and HIBOR 1W rise quite a bit, HIBOR 1mo will rise also, b/c 1mo contains the 1D and 1W. This is basic depo/funding curve arithmetic.

4) 1M is +29bp today b/c 2W is +61bp. Means the other 16-17 days of 1M are only up TINY.

5) That tells you move is 2W. Then it stops. Funny, that is 1wk after IPO close, which is when money demand peaks. And 2W is when the money comes back into the system.

6) 5mins of work (i.e. google HIBOR, talk to smart locals like @jackycwong and @sunchartist) serves one well.

7) It's a BIG, well-flagged IPO. So it will have impact.

There is plenty of time to be right about the politics. But using words like "lawlessness" and "panic" to describe a well-known phenomenon borne out by the arithmetic AND context does not serve one's followers well.

8) #NotAllHKMortgages

HK Mortgages basically come in two flavors.
1) HIBOR + spread
2) BankPrimeRate - spread

Thing is, many/most mortgages have a clause which caps HIBOR-plus mortgage payments at what it would be if it were BankPrime-minus.

And they're pretty close, so...