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🇺🇸Kyle Bass🇺🇦 Profile picture
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May 12 • 10 tweets • 4 min read
🛑 Rigid Currency Pegs Break 🛑 As an update to our seminal work on Hong Kong 🇭🇰 back in 2019, conditions today (both macroeconomic and political) will likely cause the 39-yr HKD peg to the USD to be stressed enough to cause a cathartic revaluation of the HKD. Participants 1/10
have little understanding of the fragility of such rigid relationships. Pundits from the HKMA and academia frequently report the HKD currency board is a ‘perfect’ and ‘sustainable’ relationship.This self-serving market affirmation has become somewhat of a financial apostolic 2/10
Creed that’s flawed at its foundation. Today’s HKMA ‘excess reserves’ that are reportedly liquid and ready to be used to defend the 7.85 peg amount to $42.9B. HK banking deposits are $728B in USD and $965B USD worth of HKD. If only 5.8% of USD deposits leave HK 3/10
(And practically much before that endpoint is reached), the HKMA will be overwhelmed by its defense of the peg. This is all about confidence in the Communist Party government to defend a rigid relationship (and a Chinese umbilical cord to the United States) that was put 4/10
Into place In 1983 in the midst of a full panic in Asia and a massive devaluation of the HKD. The lack of policy synchronicity coupled with the lack of economic direction is causing a stressful dislocation as we speak. The HKMA is now being forced to spend its precious 5/10
‘excess reserves’ to defend an economic relationship that’s doomed to fail. It appears that the HKMA has already been forced to spend about 6 billion HKD today (final figures not posted yet). Things will only worsen in the days and weeks to come. Behind the scenes, 6/10
the Communist Party of China is rethinking its helplessness in allowing the US Government to set and operate monetary policy for Xi in HK. Xi has newfound belief that his lack of control of HK needs to be reversed and their dependence on the US and the USD is something 7/10
They would rather do without. Recent stories are building that also suggest a change in the thought behind the peg is waning. The fact that this was printed in the South China Morning Post this morning is indicative of the changing tides. 8/10 scmp.com/comment/opinio…
Even Bloomberg (who has a thriving Chinese terminal business) is getting in on the coming dislocation. The Hong Kong Dollar's Peg Has Become Untenable 9/10 bloomberg.com/opinion/articl…
If you live and work in HK and you keep ANY of your hard-earned money in HKD,you had better move it into USD as fast as you can.Even if you don’t believe the peg can ever break, it’s free to convert and ultimately MUCH safer for your livelihood.#HK #HKD #HKExit #China 10/10

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More from @Jkylebass

🇺🇸Kyle Bass🇺🇦 Profile picture
May 11
@Apple is hiring engineers away from its Western suppliers to help Chinese State-owned YMTC meet its iPhone specs and thereby displace Apple's Western suppliers. YMTC got into the memory chip market through heavy state funding.  This is, no doubt,the result of CCP pressure on 1/5
Apple and Tim Cook. @tim_cook works hard to undermine US national security for a few more dollars in profits for his shareholders. This mirrors what happened with Huawei many years ago, where foreign companies helped Huawei to meet their specs, got hooked on China’s price…2/5
not to mention STOLEN western IP to help rapidly scale Huawei’s business. US companies, ESPECIALLY Apple, should not be allowed to repeat this horrible, miscalculated mistake and help to scale YMTC’s business and displace Western companies in the process. 3/5
Read 5 tweets
🇺🇸Kyle Bass🇺🇦 Profile picture
May 11
For-profit companies are actively working to undermine U.S. national security. Hordes of lawyers and lobbyists have been hired to fight AGAINST a new, bi-partisan bill to review foreign investments by U.S. companies to determine if they undermine US national security. 1/8
The Semiconductor Industry Association is leading the charge against a thoughtful bill to stop sensitive technology getting into the hands of our adversaries. The top semiconductor companies of the world don’t care about our national security, they only care about profits. 2/8
The bill is sponsored by Democrat Bob Casey @SenBobCasey and Republican John Cornyn @JohnCornyn This legislation will fill in the gaps where current laws don’t exist in three key areas: 1. The formation of JVs with foreign adversaries 2. The offshoring of critical 3/8
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🇺🇸Kyle Bass🇺🇦 Profile picture
May 10
A 400-yr old, $118 billion Dutch Pension fund has BLACKLISTED CHINA 🇨🇳 and Chinese investments due to China’s failing results on the pension fund’s new screening tool for ESG investing and corruption. The tool includes a NATIONAL CORRUPTION SCORE that will exclude sovereign 1/3
bonds and state entities that fail the test (China failed). It’s shocking to me that it’s taken Putin’s invasion and war crimes for the world’s pension and endowment crowd to ‘develop’ risk-based tests for investing in despotic autocracies. I guess losing everything in 2/3
‘cheap’ Russian companies taught them a multi-billion dollar lesson. Just think about how much of the West’s pension and endowment assets are already trapped in China. Hundreds of billions. #China #ChinaHustle #Blacklisted #Russia @BlackRock @blackstone @RayDalio #bridgewater
Read 4 tweets
🇺🇸Kyle Bass🇺🇦 Profile picture
May 9
Did you know that there is NOBODY from any U.S. agency to enforce ‘end-use checks’ of goods shipped to Russia and only 2 people in China? Putin kicked out U.S. officials after the Russian takeover of Crimea in 2014. The Biden Administration declares their ‘export controls 1/4
With the foreign product rule that prohibits any items containing U.S. technology’ to be subject to the export control regime. Funny thing is when we ship said products to China who then ships them to Russia, THERE IS LITERALLY NO ONE on site to oversee such transfers/sales. 2/4
The joke is on anyone that believes our sanctions are actually biting. We have only TWO INSPECTORS on ground in China where the government forces us to SCHEDULE a time and place for our inspections. @SecRaimondo and Matt Axelrod are disingenuous when they say sanctions 3/4
Read 4 tweets
🇺🇸Kyle Bass🇺🇦 Profile picture
May 4
As the FED @federalreserve searches for candidates to fill Fed Governor positions, their team is ranking new candidates on 4 categories: 1. Economics 2.Financial Markets/Banking 3.Leadership 4.Diversity. They recently had one open position down to a handful 1/4
candidates whereby they were then ranked on the new system. The Fed kills any candidates who fail the “diversity” category regardless of their capacity to understand, govern, and overall merit. The FED is the single most important economic 2/4
Institution in the world. Given the inflationary mess the US and the world face today, walking away from the absolute top candidates due to the diversity issue is incredibly short-sighted and doing our country and the world a major disservice in our time of extreme need. 3/4
Read 5 tweets
🇺🇸Kyle Bass🇺🇦 Profile picture
May 3
This would be one of the worst possible moves we could make.Reason these tariffs have withstood the test of time is that they are NECESSARY to counter China’s uneconomic motivations to put our domestic steel and aluminum industries OUT OF BUSINESS forcing reliance on China.1/3
@AmbassadorTai don’t succumb to short-term thinking against a long-term opponent. Inflation is a simple measure of too much money (printed by the FED) chasing too few goods. These tariffs were enacted for national security reasons. Look what the Chinese did to our aluminum 2/3
smelter’s capacity utilization in two short years by giving their smelters free electricity (the number one cost) and underpricing. What they did is against our laws and they have an insidious plan to force reliance on them. We all know how the antibiotic API’s ended up in Wuhan.
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