Abacus | Hong Kong a ticking financial time bomb? A thrilling story, but don’t buy what Kyle Bass is selling

The US hedge fund manager has form when it comes to forecasting financial disasters – see the global financial crisis of 2008

But comparing Asia’s premier international financial centre to Iceland or Cyprus before they went belly-up? A chilling scare story, but that’s all it is, writes Tom Holland

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Hong Kong, a ticking ‘financial time bomb’? Photo: Bloomberg

Published: 10:00am, 6 May 2019Updated: 10:00am, 6 May 2019

Everyone loves a scary story. Remember as a child when you happily suspended disbelief and crouched in delighted terror behind the sofa, peeping between your fingers as some unfortunate actor lurched around on the television screen dressed in a ludicrous rubber monster mask? The fright was delicious.

Well, the adult equivalent is a good financial scare story. And last month, US hedge fund manager Kyle Bass came out with a cracker. In a letter to investors, he warned at great length about “Hong Kong’s impending crisis”, writing that “Hong Kong currently sits atop one of the largest financial time bombs in history”.

An employee counts Hong Kong dollar banknotes at Hang Seng Bank on April 16. Photo: Bloomberg

Now Bass has form when it comes to forecasting financial disasters. He was, for example, one of the doom-mongers credited by author Michael Lewis in his book The Big Short with accurately foreseeing – and profiting handsomely from – the 2008 financial crisis.

And Bass is no stranger to Hong Kong’s financial system. At the beginning of 2017, he set up his Hayman Hong Kong Opportunities Fund to trade in the city’s markets.

So, when Bass warns that Asia’s premier international financial centre is heading for big trouble, we should sit up and pay attention, especially if we own property in the city, or entrust our savings to its banks or stock market.