8
HONG KONG IN TOUCH WITH THE WORLD
Uniquely for a financial centre of world standing, Hong Kong has no central bank, and note-issuing is handled by the Hongkong and Shanghai Bank and the Standard Chartered Bank. Note issuing arrangements were revised in October 1983 so that the rate for transac- tions between the note-issuing banks and the Exchange Fund was fixed at HK$7.80 to US$1. This had the effect of stabilising market rates for the Hong Kong dollar, which has subsequently traded within a narrow margin on either side of the link rate.
Foreign currency trading, not only in the US dollar, but in Sterling, Deutschmarks, yen and a host of other international monetary units, has been at the heart of Hong Kong's emergence as the world's third largest financial centre, and has in itself been assisted by state-of-the-art communications and a policy which places no restrictions on the flow of funds. Currency dealers daily exchange hundreds of billions of dollars into pounds, marks into yen, lira into pesetas. Some of this serves international trade, but most of it is now believed to be money looking for the most profitable home. So lucrative has this business become that banks compete against each other 24 hours a day around the globe, making money out of money. Hong Kong is ideally placed to be one of the world's centres of this electronic market, capitalising on a thousand years of Chinese trading tradition. The Chinese, after all, invented money.
In part, this is once again a happy accident of geography and the world's time zones, which allow the territory to trade while the world sleeps - and vice versa. At the start of a typical 8 a.m. to 5.30 p.m. business day in Hong Kong, it is midnight in London. As the Hong Kong dealers are snapping closed their briefcases and preparing to go home, the London market has burst into life. And by Hong Kong's dinner time, New York, too, has come on line.
But the Hong Kong currency trader's day begins long before he reaches his Central dealing room. At 6.30 a.m., Radio Television Hong Kong presents an economic roundup beamed by satellite from the BBC in London - charting the movement of currencies over- night and latest prices for gold, silver and the less-glamorous metals and other commodities. Having digested this information, and supplemented it with a scan of leading Chinese and English newspapers for any important news that may affect currency movements, the dealer arrives at his office where, using an array of electronic aids and his computer screen, he quickly checks the movement of the currency in which he specialises. Sterling is moving up, and appears likely to strengthen further. With a quick final check on the market figures, he punches several buttons and buys five million pounds, then another three million as the market keeps climbing.
By mid-morning he may have bought as much as 20 million pounds, reacting to a rising market or relying on an instinct honed by experience. A good dealer admits the job is addictive, requiring strong nerves, concentration and the ability to react quickly in the face of a falling market. Most dealers are young, under 30, and burned out in a few years of pressure. Even outside the office, dealers keep in touch by following the market fluctuations on a pocket-sized receiver which displays the latest quotes.
Now the market is falling and it is time to get out. But just as fast, large-scale buying can push the market up, too-rapid selling can force it down, so getting out must be done carefully. Five fingers wave, almost casually, and five million pounds which a few seconds ago were in Hong Kong are now in New York or London. Dealers in other cities are playing the same game at the same time, shuffling millions from bank to bank, country to country. Doing this for a living, they tend not to think consciously about the size of their deals, although at least one Hong Kong trader has a solitary pound note taped to his computer terminal as a gentle reminder of reality.