Hong Kong Dollar Peg (short HKD, long USD)

Hong Kong has been facing quite a lot of pressure from Mainland China, and a good portion of their higher networth population are sending assets abroad to diversify from Asia risk. The HKD is softly pegged to the USD and they've been maintaining this peg for 40 years. Their stock market is at a very key level of 20k HKD and could start to break down (the HKMA uses those assets as one of the collaterals on the balance sheet to maintain the peg). US govt bond yields have been rising and forcing HongKong yields to rise as well. Higher yields puts pressure on their stock market and on their real estate market (one of the most highly valued in the world).
The Hong Kong Monetary Authority (HKMA) will have to decide if they want to maintain the peg, prop up real estate prices or prop up stock prices. Usually governments take the inflation path to bail out on their obligations.

interesting take on the hong kong dollar peg:
www.youtube.com/watch?v=9SMnZxJq...
www.realvision.com/s...hong-kong-macro-play
www.realvision.com/s...light-from-hong-kong

Comment:

Stop loss for the idea was hit shortly after I posted the trade idea. Fundamentals for the trade are still there, however I misjudged the point at which this would potentially break. We are at the upper limit band again. From an rr point of view it is possible to place a trade targeting 13.1 with very tight stop losses. Bet no more than 1% of your portfolio on this for a 1000 to 1 rr trade. If it plays out great, if it doesn't play out then it was expected.

Comment:

this is now another structure that is developing. I believe we will hit the upper bands again but I do not expect the peg to break within the next year.