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The State of the Hong Kong Property Market (7)

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Posted by ltse (258 days ago)

@ dave_lister "The current state of the housing market has a very negative effect on the quality of life here for most people."

That statement is so true. I've already hedge my bets. It makes no sense these days to "analyse" the market based on fundamentals such as rental income or supply and demand. That's why it is pointless to debate whether HK property is expensive or cheap based on metrics or comparsion to other countries. Today, its all dictated primarily, and in my opinion, only by the monetary policies of the Fed and the ECB.

http://ycharts.com/indicators/effective_federal_funds_rate

I think this chart says it all, effective fed funds rate since 2009 has been at zero, coinciding with massive asset inflation is no accident. People can argue that HK tax rates are low etc hence property is affordable, all these factors were true prior to 2009 and 2008, but we didn't witness property take off back then.

So there is no doubt in my mind, property along with stocks, and commodities are in an artificial bubble, and if the saying goes "all booms must bust" is true, then the bust is going to be due to a rapid rise in interest rates.

You ought to watch this video " Inside Story - Hunger Games: the price of feeding the world "

http://www.youtube.com/watch?v=x5t00yXG3l8&feature=plcp

I think that rise in interest rates is going to be dictated by social changes, in Africa already, people are starving due to the monetary debasement the west has exported to the world. Africans spend on average 40% of income on food, compared to 6% in the USA. The central bank are effectively exporting wars and revolutions to other parts of the world with its rates and QE policies.

People look to speculators in the agricultural futures markets as the culprit for the rise, much the same way CY Leung and the ignorant masses blame the mainlanders for the property rise, which is compete BS.

Herein lies the problem for China, their economy is slowing, and yet if they create further stimulus, food inflation along with other basic needs will also rise with it, creating social unrest, that is why they are reluctant to lower rates. But if they don't, the economy will slow, people will lose their jobs, either way, they are screwed.

When the bust does come though, there is nothing to cheer about, property prices may come down substantially, but this collapse is going to be so bad, chances are you'll be unemployed, and interest rates will be high again, as in now, most people again cannot afford to get in. Assuming any savings in their bank are still there, if the bank hasn't collapsed along with it.

Posted by ltse (249 days ago)

@ Remmy "What will this do for the US economy? .... resulting in people spending more, all of which is positive for the economy"

A lot of cheers about QE3, people forget the reason for QE is because unemployment is still standing at over 8% and some 50 million people are on food stamps. The Keynesians have everything backward, lower rates will actually discourage hiring and employment. The reason being with interest rates at 0, no body is encourage to save, so there is very little capital to lend by the banks. Wallstreet can borrow cheaply from the Fed and lend it back to the treasury for the yield differential or simply gamble with it.

But small businesses can't borrow from the Fed, what they actually need is much higher interest rates to bring capital back from Wallstreet to mainstreet.

On the issue of a Hong Kong property bubble, it is amazing how after the :

-1997 HK property real estate bubble/Asian financial crisis
-2000 Tech bust
-2008 Sub-prime real estate bust
- Right now, the commodities bubble has burst

People still think its an "exception" this time, no wonder why Sir Isaac Newton said “I can calculate the motion of heavenly bodies, but cannot fathom the madness of crowds.”

The fact is printing money isn't going to work, it can raise asset prices temporarily, but a deflationary collapse is surely coming. You would do yourself much good reading this entire interview with Robert Prechter, but since some of you are not fans of his work, I will highlight the main point:

http://beforeitsnews.com/economy/2010/06/why-deflation-will-win-an-interview-with-robert-prechter-73584.html

Crux: OK, but what do you say to the argument that the Fed has the power to create inflation – to create an unlimited amount of money and credit, and inject it into the economy – at will? And because of this deflation is practically impossible.

Prechter: Is the Fed going to monetize – what's often referred to as "money-printing" – another $57 trillion worth of dollar debt, shore up trillions more of foreign debt and guarantee $600 trillion worth of derivative promises? Not likely.

Can the Fed's $2.3 trillion balance sheet – already over-inflated – keep a quadrillion dollars worth of worldwide IOUs from imploding? Not a chance.

Its own governors are already fighting about the monetization it orchestrated in 2008-2009. The Fed has been historically accommodating so far, but cracks are appearing in its resolve. Some of its own governors disagree on Bernanke's extreme policies, and that's after monetizing only 1/7 of 1% of the world's outstanding IOUs."

In short deflation, according to Prechter, creditors will stop lending, which will keep the credit supply from inflating. And debtors will default, causing the supply of outstanding debt to deflate. This is already happening in China:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100018475/china-heads-for-a-deflationary-shock/

And, this article:

http://www.macrobusiness.com.au/2012/03/special-chinas-debt-deflation/

Its points out the common argument, that China (like in Hong Kong), the household debt ratio is small, that people have to pay a huge down payment, hence little risk of a "bubble" while forgetting that in China, the real estate developments are highly leveraged. Likewise in Hong Kong, don't forget your property is an asset of the banks, so if the bank is highly leveraged, a property bust can still happen, especially given the derivatives exposure for banks like HSBC.

Meanwhile don't forget the lessons of 1997:

http://www.alsosprachanalyst.com/real-estate/what-can-you-make-of-the-experience-of-1997-home-prices-crash-in-hong-kong.html

"Home Prices in Hong Kong dropped 60-70% over that 6-year period after the Asian Financial Crisis.

Why did the financial crisis caused 6 years of protracted home prices decline in Hong Kong. Reinhart and Rogoff found that in history, a financial/banking crisis would cause the real estate bubble to burst and fall for, on average, 6 years."

Posted by Remmy (241 days ago)

From today's SCMP:

Home Prices Will Soar to All Time High by 2014

Sales of Hong Kong's new homes could reach record highs -- yes, another record high -- over the next couple of years as developers accelerate releases of residential projects, according to a report in the South China Morning Post.

"We see the property up-cycle continuing until the end of 2014 at least," Lee Wee Liat, head of research at BNP Paribas Securities, said to the Post.

"Primary-market transaction volumes should remain strong over the next two years, possibly hitting historical highs of 15,000 units and HK$150 billion in each of 2013 and 2014."

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Lee expects the number of deals in the primary market to reach 13,000 this year with a total value of HK$136 billion, compared to 10,501 deals last year at a total value of HK$133.32 billion.

He predicted that home prices would grow another 10 to 15 percent by the time 2014 rolls around.

"Developers with the most projects available for sale can capitalise on high property prices will outperform," he said.

Agents identified Cheung Kong as a likely outperformer, noting that it had more than 5,300 apartments available for sale until next year.

Its major projects include City Point, at West Rail's Tsuen Wan West station, and Lohas phase three in Tseung Kwan O. It was expected to achieve sales revenue of about HK$50 billion if all units were sold, agents said.

Cusson Leung, an analyst at Swiss-based investment bank Credit Suisse, said developers would now focus on the primary market.

"They are becoming more flexible on pricing and focusing more on asset turnover, and buying power will be absorbed by all the attention on primary projects," he said.

Sun Hung Kai Properties co-chairman Thomas Kwok Ping-kwong said last week the group would not hoard its supply of new flats.

"We will put the new projects up for sale once we secure pre-sale consent from the government," he said after the company's final result announcement last week.

Victor Lui Ting, deputy managing director, said SHKP planned to release HK$35 billion worth of units for pre-sale for the year ended June next year.

Henderson Land and New World are also likely to release more projects from now to next year, compared with their launch programme this year.

Lee said the key focus would be on their two joint-venture projects, the 928-unit Double Cove phase one at Ma On Shan and the 2,580-unit The Reach at Tai Tong Road in Yuen Long. More than 400 units at Double Cove phase one have been sold this month. Henderson Land Development also would start to see returns from its redevelopment projects, with five potential launches this year and six next year, Lee said.

Posted by traineeinvestor (238 days ago)

@ elsdon - Agree. It would be nice to have all the raw data but looking at what we do have:

1. we know the total outstadning mortgage advances by banks in Hong Kong from the HKMA data - HK$829 billion. I could not find any data for mortgage data by no-bank lenders but consider itr safe to assume that the total is quite low compared to bank lending. I have arbitrarily assumed about 10-15% of property finance is from non-banks

2. we know the number of residential dwellings in Hong Kong from the HKSAR government figures: 2.6 million

3. we can see the trend in total bank mortgages outstanding and see that the balance is rising much more slowly than property prices (meaning equity is increasing) and possibly more slowly than the increase in the housing supply (this is a bit harder because it depends on the value of the new stock being added and the old demolished stock but, if correct, tells us that the average loan balance per property is declining in nominal terms and even more so in real terms). The second point here is one that I am rather uncertain about

4. we know from the HKMA data that the aggregate value of outstanding mortgages has been steadily rising and has been rising a little bit quicker than the rate of inflation. This tells us that the real value of outstanding mortgages is higher now than back in 1997. I have not been able to get a data series on LTV ratios beyond the last couple of months data for new advances (around 54%) which does not tell us very much

5. I think that GDP and GDP per caita have been rising about as fast or slightly faster than the aggegate balance of outstanding mortgages. Unfortunately, I was struggling a bit to get consistent data sources going back to 1997 - any links would be appreciated. If this is correct then the gearing relative to the income of the HKSAR has either fallen or been more or less stable compared to 1997

6. there are various references to the percentage of new purchases which are funded by cash only and those which use mortgage finance. Citibank was recently cited as saying 60% of purchases were paid for in cash. I do not know if this is representative of the market as a whole, but it does provide some information. We also know that all or nearly all mortgages in Hong Kong are P+I meaning that borrowers are paying off a piece of their mortgage each month. I have to guess here but I would not be surprised of about half of the properties in Hong Kong carry no mortgage at all? If the number of mortgaged properties is higher, this must mean that the average balance per property is lower. If the average balance is higher then the number of unmortgaged properties must be lower

7. we also have the historical and current LTV and other lending limits imposed by the government

8. between the hard data and the guess work can conclude:

(i) if every property carried a mortgage, then the average balance would be around HK$366,000

(ii) if only half of all properties are mortgaged then the average mortgage balance is around HK$732,000

I'm not a professional, so I am sure there is plenty of room to improve on my back-of-the-envelope guess work. Any additional data would be very welcome.

However, which ever way I look at the data, I keep coming back to the conclusion that LTV ratios in Hong Kong are low and that the Hong Kong property market is not highly leveraged (quite the opposite). The affordibility issue is the deposit requirement not the loan servicing.

As an aside, I suspect that borrowing is more common at the lower end of the market and cash only more common at the top end of the market. This is a complete guess but, if true, would mean that LTV ratios for those who do have a mortgage are a bit higher than the "average" balance numbers would suggest.

Posted by traineeinvestor (227 days ago)

@ Loyd - Ahhh....the one that got away. Let's not start that. I still feel irritated with myself for bailing on Luk Fook (590) in 2009.

When it comes to QE, half the battle for us investors is trying to figure out where the wall of newly created money will end up. Emerging market real estate and selected developed market real estate and government bonds would appear to be the biggest absorbers (ignoring insolvent banks and insolvent governmets for present purposes as those are not asset classes i would choose to invest in) so far with much esser amounts going into bullion other hard assets and some currency trades. I'm not sure how much as ended up in stock markets given that retail investors have been net sellers for a few years now and banks deposits etc are at record highs.

Trying to predict where the money will flow to next is kinda hard so I'll keep looking for things that I hope represent reasonable value.

On purchasing a company which holds a property - don't. I personally would never buy someone else's company. I'd rather pay the normal stampt duty than assume the risks involved. When you buy the company you are inheriting the risk of the company being deemed by the IRD to be a trader in which case any capital gain on sale of the property is subject to profits tax. You also inherit the risk of undisclosed liabilities. You may think you can resell the company, but you need to find someone else who is willing to assume those risks (and/or give an indemnity) which significantly narrows your pool of potential buyers.

On currencies - it's not so much about which currency is going to rise against the others but which will depreciate at the slowest relative pace. Example: the AUD. People say that it's high (and it is) and that Australia is tied to China (partly true), but is Australia printing as much AUD as America, the EU, Japan, the UK or China? I'm not sure, but if the answer is "no" then there is at least a possibility that it will either hold its value or resume appreciating. I'm not making an predictions here, only pointing out that predicting currency movements requires a close look at both sides of any given trading pair and I consistently struggle to produce conclusions that I am confident in. It was easlier when the yield spread was wider and the debt/deficit issues were less pronounced because if you made a mistake, you could usually wait for the yield to make you whole. I miss the carry trade.

Posted by Remmy (225 days ago)

Re Ed "In 2008 Lloyd was making his famous statement as the market tanked 'you don't lose money if you don't sell'...

I have looked at the archived thread and absolutely nobody was recommending buying in that period after Lehman when the market was dropping just prior to QE1 and the huge China stimulus turned things around...

And nobody posted any suggestion that it was time to buy 'because stimulus would ramp the market'

Anyone who made that call and bought at the time gets the gold medal..."

I actually bought early 2009 (also managed to buy at the height of SARS). I went back on this site to see if I posted my reccomendation to buy at that time so I could claim my "gold medal", but alas I can't find anything in writing where I reccomended this. I did have a few friends who followed me in buying at that time though, so all have done well :) And interestingly, my US banker friends at the time all were picking the HK property market to fall. Which just shows me how little bankers really know, and how influenced by groupthink and negativity bankers can be.

As I searched, I did find a few quotes from this thread 450 days ago that I thought make good reading. See below :)

From me, this quote:

1. "More US stimulus, regardless of what you call it, is on the way. The US approach is to reflate its way out of the housing crisis. Due to the USD Peg, this will lead to ongoing growth in prices in HK. Now is a great time to borrow cheaply and benefit from the low rates and the benefit that the USD peg brings.

Here is a good property price graph, which is applicable pretty much for any property in Hong Kong. As you can see, prices are trending upwards, with the little blip in the end needing to be put into perspective...

The article applies to all of HK property prices http://parkislandhongkong.blogspot.com/2011/07/park-island-property-prices.html

Like others here have posted, despite all the talk of expensive prices, who here really believes prices will be lower in a year rather than higher? With the cost of borrowing being so cheap, I think any dip will be quicky met by buyers who want to "get in"."

And this little exchange involving me, Lloyd, Jaswells and Bawlucks:

Posted by bawlucks (450 days ago)
you would have to be suicidal to buy now! wow, the market might go up ten percent...
im willing to bet anyone a large amount of money that housing in hong kong will be cheaper a year from today than it is now.
any takers ??

Posted by Loyd Grossman is Miss Venezuela (450 days ago)
Bawlucks. I'm a taker. However, can't do a large amount of money. Will bet HK$5,000 for the Community Chest that the Centadata Index will be higher on July 19, 2012 than it is now (98.89).

Posted by Remmy (450 days ago)
Bawlucks - I would be prepared to bet wth you also. I think its VERY likely prices will be higher in a year from now. Are you seious about making the bet?

Posted by jaswells (450 days ago)
I have little doubt this monster bubble will implode within the next year. As this is probably somewhat contrarian Ill give anyone 4/5 on www.betable.com.

Posted by Remmy (450 days ago)
Jaswells - what makes you think there is a bubble? Property in HK seems quite cheap based on a range of usual property valuation measures, and given how much money is sloshing around. Can you elaborate on why you think there is a bubble?"

Sometimes its interesting to go back and see who has made what statements, and who has been proven correct... :)

Posted by traineeinvestor (225 days ago)

@ Remmy - thanks. I'm (relatively) new here and don't recall seeing your earlier post on your valuation methodology. If you could point me to the earlier post that would be really appeciated. FWIW, I use a similar approach when deciding whether to buy or not but I get a range of different answers depending on what assumptions I put in - the ROI I would get by investing the deposit is the biggest variable at the moment and future interest rates is another one. At one stage, I concluded that I was better off buying and renting in Hong Kong even if prices never increased.

@ Ed - excessive money printing relative to GDP is not unprecedented ad usually goes hand in hand with hyperinflation. That seldom ends well (if ever). However, I really take issue with the claim that we have bubbles in various asset classes:

1. HK property - expensive but not bubble. There's no leverage, reduced transaction volume and most buyers are buying for self use, for rental income or as a store of value - SSD has taken the short term speculators out of the market

2. HK equities - on all the main valuation metrics, they are trading at below long term averages. Even if you consider them to be overvalued (I don't), I fail to see how claims of a bubble can be justified. Much the same would apply to all the other major equity markets in the world

3. bonds. Arguably a bubble in that a lot of the buying is by central banks who are not buying for any rational investment reason. Based on current inflation rates, you have to either go a long way out on the yield curve or take a meangingful hit on credit quality to produce a positive real return. This is only rational if you either believe that all other asset classes will do worse or that we will get net deflation over the life of the bond

4. gold. Gold has no fundamentals which can be analysed. Whether gold is over priced or under priced is either largely or entirely a matter of speculation. If you claim it is a bubble, I can't argue with you. But, if you think it's a bubble, would you want to hold gold?

5. Other commodities - we'll have to be more specific here. Gas is clearly not a bubble (prices in the US have fallen a lot due to shale gas). Most food stuffs have relatively tight supply constraints +/- seasonal fluctuations (including rice in spite of the intervention by the Thai government). Iron ore has fallen a lot (although now recovering). Happy to consider others.

Expensive does not mean a bubble. A boom is not a bubble. Normal market fluctuations are not bubble inflating and bursting.

Countries have had ZIRP or near ZIRP for years on end. Japan is one current example. In spite of Japan's macro economic and demographic issues (which are negative), Japan's people have not done that badly over the last 20 years. (The next 20 may or may not be different.)

You keep going raising the strawman arguement about what would happen if QEternity were to stop tomorrow. This won't happen unless and until either (i) US unemployment falls to politically acceptable levels and/or (ii) US CPI inflation rises to politically unacceptable levels. Why else would they stop? Until then, ZIRP and money printing will remain with us and it would be reasonable to expect these policies to continue to support asset prices and exert a degree of inflationary pressure. Also, the devleraging of the banking sector which is absorbing much of the newly created money will not go on forever (although I have no idea when that process will start to wind down).

There is absolutely no doubt in my mind that ZIRP and QEternity are two of the biggest factors driving markets at the moment (of course, there are several others which are also material). The difference between us is that I do not see bubbles as that term is correctly used.

Like you, I don't know what will happen but I still have to allocate my meagre life savings in a manner which will give me the best shot at maintaining our current standard of living over the longer term without having to go back to work (I am taking early retirement next year). I keep coming back to the idea that cash flow (rents and dividends) from real assets (shares and property) sufficient to pay our way backed by a few years of cash/near cash and a small amount of bullion to tide us over any disruptions to that cash flow is the safest approach. I am really open to other ideas but I have yet to see anything that makes a lot of sense in an inflationary world.

Last point - there are record amounts of money sitting on the sidelines in bank accounts, on deposit, in CDs etc. Not just high amounts but record amounts. And it is losing value on a daily basis as even today's low inflation eats away at it. At some point people will either wake up to the fact that they are getting poorer or they will get over their fear of markets and invest in risk assets.

Posted by traineeinvestor (225 days ago)

Ed

1. Even on a per capita or comparative GDP basis, I absolutely agree that what the US is doing is much bigger than what Japan has done. Even if you make some adjustments for the fact that US growth continues to be better than Japan and the US population is growing and not contracting, the difference is still huge. No debate there.

2. The peg plays a huge role in what goes on in Hong Kong's property and other markets. Again, no debate there either. There have been times when the peg has been a good thing for Hong Kong and times when it possibly does more harm than good. Again, I agree that the combination of the peg importing some of the US's stimulus and the PRC wealth export effect have contributed to property prices being where they are today (and interest rates for that matter).

Personally, I love the peg but then I really have to since I have spent a number of years effectively being paid in either GBP or USD and investing most of my savings right here in the HKSAR. Clearly I exhibit bias here :-)

3. the combination of rising wealth (China's middle class is exploding), ample liquidity and increasingly weak currency restrictions have sloshed over into increased demand for HK property (and a few other places). China's stimulus has contributed to this. The question is whether it will continue. While demand from Chinese investors will certainly fluctuate, my belief is that China's middle class will continue to grow and that the number of people in China who can afford to buy in Hong Kong will continue to rise. Most of the data I have been able to find supports this view (the Cap Gemini Wealth Reports are a good source). What could cause this demand to slow down? If the stimulus drops, then that would suggest that the stumulus is no longer needed which implies a healthy economy (which implies the wealth effect is alive and well) or high inflation ( in which case I would expect that the PRC government would allow more people to take their money out of China as a cooling measure).

I think our main difference is how we anticipate the current macro factors (economic decline, QEternity, ZIRP etc) ending. I'm expecting either inflation + economic recovery or stagflation (inflation + no or limited economic recovery) as the most likely outcomes and have largely positioned myself for that expectation.

If I'm reading you correctly, you expect the ending to be a lot worse. And you could be right - your crystal ball could be clearer than mine - so I've tried to give myself a degree of protection against other outcomes. I even purchased a little bit more gold.

Posted by Remmy (225 days ago)

Ed - property is an even better hedge against hyperinflation. Why? Well one, because no matter what people "need" property. They do not need gold. Honestly, in a time of crisis, what are you going to chose for you and your family? Shelter and possible income producing land? Or a lump of gold?

Secondly the cost of materials, labour etc all go nuts during times of inflation. If you own property you are already in and hedged.

Gold is a portable asset? Not really. Most people's exposure to gold is actually electronic and intangible, not physical, so all these "intangible rights" can be lost just as easily as property. And are you really going to be carrying lumps of gold around as you escape WW3?

Gold has no underlying value at all - don't kid yourself. We could decide to use rocks, water, diamonds, pieces of wood - anything as a currency - all of these are dependant on "the greater fool". Property produces a true, measurable yield, and this has a calculatable value. And as long as humans are around there will always be a demand for it as it serves a basic need. This is not the case for gold.

If/when gold unwinds, it could be really really quick, as people realise they are holding an illusion. Please tell that to the fund manager...

By the way, I know many many fund managers, and whilst thre are a few truely smart ones, overall they are not that much smarter than most financally educated people. They know the lingo, they mix in hedge fund circles, they get sent thousands of analysts reports, but the more I know them, the more I realize one should take everything they say with a grain of salt (which is why I give very little respect to the "oh a heard a fund manager say x" type statement in support of a viewpoint. I would think that someone like TI would be a much better bet to keep money with for a good stable return than most fund managers, who at the end of they day are really just out to enrich themselves.

Re your point "you are on an island by yourself if you think the global economy won't tank if Bernank stopped printing... I guarantee you - if he went on tv tonight and made that pronouncement the stock market would immediately collapse...", let me ask you this:

What it the HK Govt, monetary authority, etc decided to completely remove all of the many restrictions, taxes, disencentives, antispeculation measure, etc we currently have on property immediately. I gurantee you - if these were announced on TV tonight...

You get my point (I hope).

Posted by traineeinvestor (214 days ago)

Loyd - good question and one to which I do not know the answer. I can only speculate, and invite people to point out where I am wrong or have missed things.

The first point is that the HKMA does not actually print substantial amounts of money (unlike the Fed). As an example, only HK$10 notes (and all coins) are issued by the HKSAR government and these represent just 3.5% of total physical HKD notes and coins in circulation - the other notes are printed by the three note issuing banks. In any case, the HKMA is most likely selling some of its existing reserves of assets denominated in Hong Kong dollars and has used them to buy other assets (I would guess that most would be denominated in USD, but that's just a guess). If all that is happening is that the HKMA is selling exiting HKD then there is no new money being created (so this is not QE) - the money has only moved from one person to another group of persons. The question becomes: what will the recipients do with that money? By and large, the HKMA was just sitting on the money (but it is still in circulation to some extent because the HKMA will have held it somehwhere in the system in one form or another). What will the new holders be doing?

Possible uses:

1. speculators may take a message that the HKMA will not allow the peg to go and unwind existing HKD short positions - this is effectively the reverse of what the HKMA has done (equally it could be claimed that this shows the peg is under pressure)

2. stick it in the bank ( interest bearing deposits) or bonds - effectively helping to keep interest rates down. FWIW, HIBOR didn't move much at all last week (still waiting for today's update as I write)

3. pay of HKD obligations

4. buy risk assets (including selling HKD for other currencies)

(I'll ignore holding it in cash as that wil be de minimus.)

All of these result in the additional HKD circulating at least once through the system and there will almost certainly be continued follow through transactions. In short, what has happened is that a lump of HKD has been taken from a relatively inactive state on the HKMA's balance sheet and put out into the market to circulate as it will. In other words, there will be more potentially active money sloshing around the system.

But (and it's a big but), USD603 million is not a lot of money - it is less than 0.4% of total M1 in Hong Kong and a much much smaller precentage of M1-M3 combined. In the overall context of Hong Kong's total money supply, it's peanuts.

A claim could be made that it is movement at the margins which moves markets. While this is true, I have no basis on which to evaluate the imapct (if any).

Conclusion: I suspect that the greater impact will be in the two contradictory messages sent to the market than in the money movement itself:
(i) the HKD is strong and safe - come and send your money here - it's USD with possible upside
(ii) the HKMA will defend the peg - speculators stay away
It certainly will not reduce the amount of liquidity in the system.

Please fire away.