Singaporeans Love Hong Kong – SGDHKD

For all the similarities between Singapore and Hong Kong, their monetary and foreign exchange policies cannot be less than a universe or two apart.

The first thing anyone who is forcibly posted back to Singapore from Hong Kong does is to lament on their pay cut.

It is not funny because if you went over to work sometime in the mid 2000’s, you would be looking at a pay cut of 25% on just the currency.  (except if you are a dishwasher, because i hear dishwashers’ salaries just got hiked to SGD 3.6k equivalent which would somewhat mollify them on the exchange rate loss)

The Hong Kong dollar has been pegged to the USD since 1983 and one of the last remaining currency pegs in the developed world because I would consider the USDCHF floor more than a threat.

Since China’s reluctant currency appreciation in 2005 and its suspiciously hurried pace this year, we wonder if it is for the sake of fighting the currency wars by buying up the west ? CNY started overtaking HKD in Dec 2006 and never looked back.


What are you doing when you buy HKD ? Simple – you are buying USD or buying the fact that the Hong Kong government has an equivalent amount of USD in its exchange reserve fund held at a fixed exchange rate of HKD 7.8 to 1 USD. The HKMA will step in at 7.75 and 7.85 to buy and sell the HKD.

Singapore, on the other hand, is on a one way road of appreciation against the USD where the sky is the limit and beyond that, to the ends of the universe as long as inflation exists in her shores which makes the peg look a tad archaic and a relic of the past. The SGD remains a guessing game, yes – Guess How Strong It Can Get ?

So where to from here ? And that is the purpose of this article, peculiar as it feels to me to be writing about something that is akin to challenging the laws of physics.

Let me outline some events to look  out for in the future.

1. USD strength is returning especially with the TAPER bulls calling for a taper as early as December.
2. China, China, bouncing back strong and we are expecting the IPO market to unfreeze onshore after a 1 year hiatus which would lead to 1. money going back to China and 2. longer term stock rally in general, including H-shares.

shcomp vs hscei index

Singaporeans love Hong Kong, for shopping, for food, for parties and Disneyland. But if you ask me what they love most ? It is probably the indomitable spirit.

My target for SGD HKD is for 6HKD to 1SGD by year end and under 6 towards 5.80 by 1Q14, just in time for the Rugby 7’s, 28-30 March 2014. Pity there is no Cathay promotion for Singapore-Hong Kong then – must be the need to keep inflation high.

Let me know if anyone has a spare ticket. Good luck !