Soros looking set to attack Asian currencies again

Soros looking set to attack Asian currencies again

Staff Reporter

2013-04-24

George Soros may be paying attention to Asian currencies again. The currency speculator recently paid a visit to China and Hong Kong, triggering concerns of his return to the region after his large bet against the Thai baht in the late 1990s.

The hedge fund billionaire has reportedly made more than U$1.2 billion betting against the Japanese yen since November of last year.

Early this month, Soros attended an annual convention in Hong Kong organized by the Institute for New Economic Thinking, a New York City-based nonprofit thinktank he co-founded.

At the conference on April 6, Soros joked that he was ready to attack the Hong Kong dollar, in response to a question from the audience on whether Soros might be shorting the currency as his next target after the yen.The questions reflect a concern that first arose in 2010, when Soros’ investment company Soros Fund Management set up an office in Hong Kong.

After the visit to Hong Kong earlier this month, Soros attended the Boao Forum for Asia, held from April 6-8 in Boao, Hainan province. In his speech at the forum on April 8, Soros pointed to the problems facing China’s economy and its need for transformation. Among the problems he raised were the country’s shadow banking system, state-owned banks’ nonperforming loans and the potential risks in the overheated housing market.

Soros argued that it is time for China to change its model of growth from a reliance on exports, saying the model may continue to function for another year or so, but not over the next 10 years. He even raised the prospect of a hard landing for the Chinese economy.

The billionaire investor maintained that as China’s economy is growing at a rate under 8%, the slower growth will exacerbate the problem of bad loans and make consumers more cautious.

A hard landing is usually defined as an economy slipping into recession rapidly after a period of expansion, and often occurs after a government has aggressively tightened monetary policy to cool inflation or after an economy has suffered abrupt internal or external shocks.

Soros also alerted his audience to the risks arising from a combination of China’s shadow banking system and its overheated housing market.

China’s state banks have accumulated large amounts of bad loans as a result of rapid development in the property market. After the central bank raised interest rates for mortgage loans in an effort to curb the market, many buyers have turned to derivatives provided by the country’s shadow banking system, which carry risks similar to those that triggered the 2007 subprime mortgage crisis in the United States, Soros said.