Ackman targets Hong Kong peg

HEDGE fund billionaire Bill Ackman has taken a large bet against the Hong Kong dollar as the city state struggles to rebound from severe Covid lockdowns and an exodus of Western financiers.

The Wall Street fund manager is the latest high-profile figure to take a public short bet as US interest rate rises hammer Hong Kong’s currency system.

Mr Ackman said it is “only a matter of time” until the Hong Kong dollar’s peg to the US currency breaks as he revealed that Pershing Square, his hedge fund, had a “large notional short position against the Hong Kong dollar”.

The Hong Kong dollar has been pegged in a tight band – between HK$7.75 and HK$7.85 per US dollar – for nearly four decades and tends to face pressure every time the Federal Reserve puts up interest rates.

Hong Kong’s Monetary Authority maintains the peg by moving interest rates in lockstep with the Fed and by currency intervention.

Mr Ackman’s bet would pay off if the currency’s US dollar exchange rate crashes through the floor of the narrow trading band.

He said: “The peg no longer makes sense for Hong Kong and it is only a matter of time before it breaks.”

In the late 1990s, George Soros also took a sizable bet against the Hong Kong dollar but was ultimately forced to drop his short position.

Earlier in the month, Paul Chan, Hong Kong’s financial secretary, warned speculators seeking to bet against its currency, saying: “If you bet against the Hong Kong dol- lar, you are bound to lose.”

It comes weeks after Hong Kong launched a $3.8bn (£3.4bn) fund to lure foreign businesses back to the region after years of isolationist Covid policies and political turmoil.

John Lee, who took over as chief executive of the region in July, said the plan will attempt to reverse an exodus of foreign nationals by cutting property tax for nonpermanent residents and relaxing visa rules.

The Covid crackdown has coincided with Hong Kong increasingly coming under Beijing’s influence, which has led to the suppression of prodemocracy campaigners.