The Ever Shrinking HKD...

[Apple Tree Yard]

I would like people to post letting us know the true extent of financial damage being caused by the ever devaluing HKD. The company seems wholly uninterested in our plight. Since 04, I have seen my salary in GBP shrink by almost 40% (not sure of the exact number...too depressing to work it out!). Really appreciate the 3% offered by the company.... Funny how airlines like Emirates offer a currency compensation factor....sure that our management are working on a fix for this problem...

[asianeagle]

Currency devaluation factor should also have been included inthe negotiations dont you think? Perhaps part of a well thought out plan..... you think???

[Team America]

When I joined 1 AUD = 4.20 HKD

F/O Pay HKD 65000 = AUD 15300 :)

Now 1 AUD = 7.15 HKD

F/O Pay 65000 = AUD 9100 :{

If they want to keep employing expats they need to look at this. If you are in Oz stay there, more money at VB and J*.

Yes I know most of my living costs are in HKD's but they have gone up a lot, (more than 3%) and would be nice to pay something off in Oz before you go back, but getting pretty hard now to do that now.

[hongkongfooey]

Not too mention if you have an investment property (s) in Oz, getting shafted by the HKD and the Reserve bank, :mad:s

[Apple Tree Yard]

I suppose if I intend to retire in HK...then no problem... In reality, we ALL will be retiring to our home countries. It is now getting almost impossible to service a mortgage back home. If you are living here with children, forget about buying your 'dream home' back in the UK, AUS, CAN... Very depressing. Time to leave.

[newbie1972]

Cx are laughing all the way to the bank. They are making much of their money in currencies such as the AUD, NZD, GBP etc which have appreciated immensely in the last few years. Their outgoings are mainly in USD/HKD (including staff wages). Although some outgoings have increased (e.g. fuel), the overall effect is a huge increase in revenue from exchange rates alone. Funny that none of the staff are getting any benefit from this.

We made sacrifices during SARS, have increased our cooperation efforts to enhance our new found good relationship with the company, agreed to a rostering system that has increased productivity by about 20%, but of course have gotten nothing in return. Not even inflation related increments for the last 6 years. 3% payrise? Laughable and an insult!

[Liam Gallagher]

Everytime the Friday Telex says "currency worked in our favour".... it really means "currency worked against HK staff".... the company know this better than you as they have been playing this game a long time.

Revenue is generated in a mix of USD and "Other currencies". As the USD falls the "other currencies" take on greater value for the company. The company's cost are predominately based in USD being Fuel and Aircraft and staff (mainly HK based). Therefore as the USD falls, Revenue (expressed in HKD) rise; costs are broadly unchanged and profit (expressed in HKD) rises. Good news for the bottom line figure; questionable news for the UK investor(s)......

Under the new regime... if you don't like it leave.... enough guys leave and maybe.... possibly maybe.... you may see a currency mechanism in your salary. In the meantime... this is a waste of bandwidth....

[Dan Winterland]

Emirates have a currency exchange rate factor. When CX and KA have a third of the fleet grounded, perhaps we will get one.

[Virtual Reality]

Before a third of the fleet grounded, the equal number of aircraft from Air China and China Eastern will be flying around using CX callsign......:ugh:

[Mullah Lite]

Just thinking about the number of people who shell out the $$$ for a CX ticket and find they're boarding an MU plane instead. Don't think that would be a hit with the flying public for very long.

[Nullaman]

Before a third of the fleet grounded, the equal number of aircraft from Air China and China Eastern will be flying around using CX callsign

Suspect they have their own crewing problems. Perhaps some Russian airlines have some availability tho'.......

[slow and low]

Could be worse.
You could be trying to live in Canada.
In the past year, Cdn dollar up 24% to a 50 year high against the U.S/Hong Kong dollar

2002 62 cent dollar
2004 77 cent dollar
2006 86 cent dollar
Today 105 cent dollar

[missingblade]

Nice to know that not only does the house in Vancouver cost 3 times more than 5 years ago but also my money is worth half. So property in CAN is now 5 times more expensive if you are on a CX salary in HKG? Not even taking higher interest rates or the effect of inflation on my expendable income into account - you figure I could still get that place in Whistler?

[Kitsune]

Makes all those 'I made x million HK$ on my house in Disco Bay' look a bit sick in real currency too......:p

[Al Fakhem]

Working overseas always requires factoring in potential FX shifts and to be realistic, you can't expect the upside to last forever. Markets have the lousy habit of adjusting themselves in a way that levels out unrealistic differences in relative costs.

[404 Titan]

An undersatnding of how the currency market works will tell you that money moves around the globe looking for a fast and high return like sheep looking for long grass. Just like the Aus dollar was at unrealistic levels about four years ago, ie US$0.47, it now is getting to unrealistic levels at US$0.90. Political changes in Australia and the US over the next 12-18 months will bring the US$ back to a more realistic level.

[cpdude]

Nice to know that not only does the house in Vancouver cost 3 times more than 5 years ago but also my money is worth half. So property in CAN is now 5 times more expensive if you are on a CX salary in HKG? Not even taking higher interest rates or the effect of inflation on my expendable income into account - you figure I could still get that place in Whistler?

I feel for those trying to save to come back to Canada but imagine how bad it is for those living in Canada with a US salary? They continue to receive salary cuts living in the high cost of the Canadian economy.:sad:

[Apple Tree Yard]

...another 3 % loss against the CDN $ since I started this thread.....:mad::ugh::{

[oicur12]

A financial expert on CNN this morning predicts the USD will slide to half of its present value.

The global market is moving away from the greenback and turning to gold and putting other currencies such as the Euro in the basket.

Earning USD (or anything tied to it) but investing outside the USD system is doomed.

[404 Titan]

oicur12

I didn’t see this so called expert but I am always very wary of anyone that comes on TV or anywhere else for that matter and talks crap like this. 90% of the time they have a vested interest in wanting this particular outcome come to fruition. Most carry on about US foreign debt, both private and public to support their argument. The reality is that most of Europe, Australia and New Zealand have the same if not worse debt problems than the US. Australia, while having government debt under control has a private debt crisis. The only western country that currently is in good shape is Canada and that is because of oil. Now while I think the US$ still has further to decline, we are now reaching a level that the US$ is considerably undervalued. When we see a proper correction in global equity markets in the next 12 -18 months, we will see an unraveling of currency trading positions similar or worse than what we saw in August, and remember August was just a bump in the road. When we see the proper correction it will be long lasting and pronounced. Some of the emerging markets like China and Vietnam from my point of view are a train wreck waiting to happen.

While we are talking about the currency market, it is interesting look and see how the dynamics have changed in the last thirty years or so. In 1975, about 80% of foreign exchange transactions (where one national currency is exchanged for another) were to conduct business in the real economy. For instance, currencies change hands to import oil, export cars, buy corporations, invest in portfolios, or build factories. Real transactions actually produce or trade goods and services. The remaining 20% of transactions in 1975 were speculative, which means that the sole purpose was an expected profit from buying and selling currencies themselves, based on their changing values. So, even in the days when the real economy was dominant, some currency speculation was going on. There had always been that little bit of frosting on the cake. Today, the real economy in foreign exchange transactions is down to 2.5% and 97.5% is now speculative. What had been the frosting has become the cake. The real economy has become just a small percentage of total financial currency activity.

[oicur12]

"I didn’t see this so called expert but I am always very wary of anyone that comes on TV or anywhere else for that matter and talks crap like this"

Lets pretend this expert is full of crap. Can you explain why gold is at an all time high. Can you explain why OPEC has suggested shifting the trade of oil away from USD. Have you heard of Jim Rogers, do you know what he has to say about the USD. Or Soros.

"The reality is that most of Europe, Australia and New Zealand have the same if not worse debt problems than the US"

You are correct. They do. However, these countries are not seeing a sell off of thier currency as they have not traditionally been the global currency of choice like the greenback. Global trade is not conducted using these currencies.

[404 Titan]

oicur12
Can you explain why gold is at an all time high.
Yep inflationary concerns. People are worried things are starting to overcook in the world economy.
Can you explain why OPEC has suggested shifting the trade of oil away from USD.
OPEC like usual are chest beating, just like China regarding them selling off US$. The reality is that they have more to loose doing this than the US has.
Have you heard of Jim Rogers, do you know what he has to say about the USD. Or Soros.
Don’t get me wrong, I will always listen to what others have to say regarding currencies but at the end of the day I will always fall back on my seven years as a currency trader for one of Australias largest banks than accept as gospel someone elses opinion. Most of them are coming from a vested interest point of view. That includes me as I have positioned myself to benefit when the markets correct and they will. The US is still by far the largest economy in the world. The Chinese and the EU still don't even come close. Until the Chinese (about fifty years away) and the EU are bigger, the USD will remain the currency of choice, just as the GB£ was before it.

[sisyphos]

404,

the economy in the E.U. is already bigger compared to the U.S. Just do a quick search on the net. ( It makes sense too, since the population is much larger) .
China will overtake both in a much shorter time according to the vast majority of experts, given the fact that the population is about four times(!)larger compared to the U.S.

http://www.cbsnews.com/stories/2004/12/06/opinion/fenton/main659179.shtml

[hongkongfooey]

My money is on 404 :ok:

What has population got to do with economy ?, I would suggest some of the poorest countries in the world are in the EU. There are plenty of heavily populated places in Africa that dont have a great economy either, so not much of a benchmark.

[Numero Crunchero]

Almost all trade is done in USD. Asia and the middle east hold Trillions of dollars in USD assets. The US is the only country that would like to see a weaker USD!

Like it or not, we are a USD world at the moment. 100 years ago it was the GBP - 2000 years ago it was the dinarius! The USD is the world's reserve currency.

Whilst I think the long term trend for the USD is downwards, markets do not move in straight lines. They tend to oscillate wildly around long term trends. When the AUD was 47c no one on TV said it was good value and would climb to 92c within 5-7 years! Likewise no one now is predicting its fall. The catalyst for the 10cent fall(AUD) a couple of months ago was credit concerns over the sub prime market in the US - something Australia has no exposure to. The flight to quality at the time was out of the commodity currencies and back into the USD - so the USD isn't dead yet!

Australia's trade balance has been in deficit for the last 6 years. Now, a deficit on terms of trade is not necessarily a bad thing. It shows the country is investing lots of money in future productive capacity. But with commodity prices 200% higher now than they were 5 years ago, you have to wonder when Australia will finally achieve a Trade Surplus! The stronger AUD just encourages more imports and overseas travel.

So like 404 I am betting on a significantly stronger USD vis a vis AUD, in 2-3 years.

[sisyphos]

a few facts can't hurt me thinks:hmm: :


GDP U.S.A. 13,16 trillion total or 43800 U$/ capita

E.U. 16,6 trillion total or 28213 U$/capita

source : wikipedia,bbc,cnn/ check for yourself !

The higher per capita value of the U.S. is overruled by the smaller population ( 301 000 000 compared to close to 500 000 000 in the E.U.).
The total GDP is, of course, the result of the per capita value multiplied with the total population number.

While it is true that the E.U. has a few poorer East European members ( hence the difference in per capita income), the influence is negligible due to the comparatively small numbers ( population of e.g. bulgaria only 7 322 858 U$ or 10 843U$/capita).

The lower per capita income is interesting for another reason : growth potential is relatively higher when starting from a lower base ( see china ).
Every serious prediction I know sees higher future growth rates within the emerging countries ( China, South America AND Eastern Europe) compared to the established western economies ( U.S., Western Europe). This means that the gap between the E.U. will eventually become even bigger than it is now.

[404 Titan]

sisyphos

I think you have missed my point. The EU isn’t one economy. It’s 27 that just happen to share a common currency. 27 economies with 27 different agendas with 27 times the red tape and bureaucrats.

[Dan Winterland]

16.22 HKD to the GBP this morning. The HKD's link to the US dollar is becoming less tenuous as the greenback is heading rapidly towards Andrex status. It's time for the HK overnment to bite the bullet and break the link and prevent last week's fiasco where they had to inject billions into the money market to prop up the HKD to keep it in line with what is quite plainly becoming the market force in the FX markets. The Yuan!

[sisyphos]

Dan,
the problem with the Yuan is not very different to the misery we have today with the HK$: they are both (more or less) pegged to the U$.So what difference would it make if the Yuan will gain in influence/ replace the HK$ ? ( hope I understood you correctly here)

NC wrote : " The US is the only country that would like to see a weaker USD!"
That is not correct in my opinion : The Chinese are quite happy with it, since it keeps the prices of their exports to Europe low ( Which is vice versa the reason Europeans worry about it).

404: If we discuss the value and the future development of the EURO, we have to look at all the countries who are using this currency. While it is correct that the U.S. are bigger than any European country, and technically the EU is only a superficial product ( as many countries), the Euro nevertheless is supported by a bigger economy with higher growth rates than the U.S. Your statement " the EU isn't one big economy " is highly debatable in my view in the first place, but in any case irrelevant in my opinion if discussing the currency supported by most countries of the EU. In other words : the U.S. economy would be according to your perspective just the combined force of California, Texas, Ohio, etc..

You said : " The Chinese and the EU don't even come close ( to the U.S. economy)" The Chinese GDP is already 10,17 trillion at the moment, compared to 13,13 trillion ( 2006 est) of the U.S. , growth rate of China are about fivefold compared to the U.S. at the moment ( 10 % versus 2% ).
So your predicted " 50 years" look more like 5 years actually.

best regards

[404 Titan]

sisyphos

An economy is the general term for all the activities involved in producing, distributing, and consuming goods and services in a specific area. So yes the EU does fall into that definition. The only problem is that individual national agendas will always dictate over EU agendas. The US doesn’t have this problem.

Regarding GDP, yep no argument there. If we start looking at average incomes though in both countries and living standards it is obvious China has a serious problem. To keep a lid on national unrest because of the growing disparity between the “haves” and the “have not’s”, China must maintain a high growth rate. It’s a very delicate type rope walk between sustainable economic growth and overheating the economy. I believe that 10%+ economic growth rates year on year will result in a catastrophic melt down. If we also see economic sanctions placed on China by both Europe and the US as it is starting to appear they may do, this will only make things worse.

Unfortunately the western world is fast approaching a protectionist stance against China and other developing nations. No one is a winner with this but the nations with the highest growth rates will suffer the most.

[bored]

an interesting doco on You Tube,

http://www.youtube.com/watch?v=k1oPEfa9Lws

about the history of the USD being the world's reserve currency and why its future is now pretty uncertain(according to this short film).
And in addition to this, remember the last gold bull run of late 70's/early 80's(I don't, I was 4!). Anyway, it surged as the USD fell due to inflationary pressures just like now. People are suggesting the AUD might reach parity with the US......in the early 80's it got to about 1.30:1 with the USD, which is roughly another 45% from where it is now.

I'm not an economist or currency trader but i would listen to someone like George Soros.

[404 Titan]

bored

The Aussie dollar was pegged to the USD in the early 80’s when it was worth US$1.30. It wasn’t completely floated until about 1986 if I recall. There were two revaluations of the AUD each down by about US$0.10 prior to floating. After it was floated it quickly lost another 10-15% of its value. Most currencies were still pegged to the USD well into the first half of the same decade. The difference between then and now is that back then governments through their central banks set the exchange rates. Today the markets determine exchange rates.

You won’t get an argument from me that the importance of the USD as the world reserve will slowly diminish with time. Just like when the GBP was the world reserve, it didn’t change to the USD overnight and it certainly didn’t spell disaster for the GBP. Just look at it today. It is one of the world’s strongest currencies. The process took about 30 years and was only accelerated because of WW2. The fundamentals of the US economy are very similar to their European, Australian and New Zealand counterparts. All these countries spend more than they earn. My prediction is that while the US is now slowing down, the lowing of interest rates compounded by a low USD will see a marked pickup in the US economy late in 2008 early 2009, just as the rest of the world is slowing down because of rising interest rates and overheated economies. Capital will then flow back into USD and JPY resulting in them rising in value.

[oicur12]

Dont forget that the Pound lost almost 80% of its value as it lost its status as reserve currency.

The greenback will do the same.

[404 Titan]

oicur12

Yes and no.

In 1940 the GBP was pegged to the USD at 4.03 to 1. This marked roughly the beginning of the USD dominance as the world reserve. In 1949 the GBP was devalued by 30.5% to 2.8 to 1. Again in 1967 the GBP came under pressure and was further devalued by 14.3% to 2.4 to 1. It should be noted that each time the GBP was devalued, quite a few other currencies that were pegged to the USD were devalued by their central banks as well. With the breakdown in the Bretton Woods fixed currency system the GBP was finally floated in the early 1970’s. As with all free floating currencies the GBP has been as low as 1.05 to 1 in 1985 before returning to 2 to 1 in 1990. It has been at roughly 2 to 1 ever since.

So looking at history between 1940 and 1967 the GBP was devalued by the Bank of England by 40.4%. Between the early seventies and 1985 in the free market the GBP lost a further 33.5% from its 1940 value but between 1985 and 1990 it gained value by 90.5% compared to its 1985 low to the USD. So compared to 1940 the GBP is about 50% of its value to the USD.

Today the GBP is the fourth most traded currency behind the USD, Euro and JPY.

[Big Night Sky]

Titan

Thanks for the detail you have provided in your posts.

Do you see the HKD/Yuan continuing to remain pegged to the USD in the future?

BNS

[404 Titan]

Big Night Sky

For the short to medium term yes. There are too many problems with the Mainland Chinese banks to float it tomorrow and its rapid rise in value (it is currently substantially undervalued) would cause havoc with the Chinese economy. The Central Government will continue to make revaluations of the Yuan over the next few years before they will consider floating it. My guess is 5 – 10 years. As for the HKD. There may be a revaluation upwards in the future but not by much. Once the Chinese float the Yuan I would have to assume the HKD will be floated then as well. Mind you we may see an integration of the HKD with the Yuan before that ever happens.

[oicur12]

It will be a long time before the Chinese depeg the RMB. The banking system is not ready to cope and cannot accurately determine how much hot (speculative) money there is in the economy.

The next big monetary challenges will be the introduction of the Amero to bring Mexicos cheap labor and Canadas natural resources into Washingtons sphere of influence followed by the Fed issuing computer chipped gold bullion.

We live in interesting times to say the least.