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De-Dollarization Continues: Russian Oligarchs Shift Cash To Hong Kong Dollars On Sanctions Concerns

Tyler Durden's picture




 

Last week we noted the very significant activity by the Hong Kong Monetary Authority as it bought USDollars in size to support its peg. It appears we have found at least one smoking gun for why they were forced to do this. In what appears to be another sanctions-blowback, Russian oligarchs are de-dollarizing their cash holdings and shifting to Hong Kong Dollars. As Bloomberg reports, various Russian entities are shifting up to 40% of their cash to HKD. “Keeping money in Hong Kong dollars is essentially equivalent to keeping it in U.S. dollars because of the currency peg," notes BofA's Vladimir Osakovskiy, adding "for Russian companies it’s still much safer from the standpoint of sanctions."

 

As Bloomberg reports,

OAO MegaFon (MFON), billionaire Alisher Usmanov’s wireless operator, said it has been shifting cash holdings into Hong Kong dollars, a move people say metals producer OAO GMK Norilsk Nickel (GMKN) is also undertaking, as the U.S. and Europe ratchet up sanctions against Russia.

 

MegaFon decided to keep about 40 percent of its cash in Hong Kong dollars given the global markets disturbances, Chief Financial Officer Gevork Vermishyan said in a phone interview. The Moscow-based carrier has traditionally kept its foreign cash in U.S. dollars and euros, according to the company.

 

Norilsk Nickel, the world’s largest producer of nickel and palladium, is also keeping some of its cash in Hong Kong dollars now, two people with knowledge of situation said, asking not to be identified as information isn’t public.

 

The Hong Kong dollar has been linked to the U.S. dollar since 1983, and its fluctuation from the American currency hasn’t exceeded 1 percentage points since then...

Keeping money in Hong Kong dollars is essentially equivalent to keeping it in U.S. dollars because of the currency peg,” said Vladimir Osakovskiy, chief economist of Bank of America Corp.’s Russian unit. “Still, for Russian companies it’s much safer from the standpoint of sanctions.”

*  *  *
One more chip in the US Dollar's global hegemony armor...

 

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Mon, 08/04/2014 - 18:36 | 5046254 wintermute
wintermute's picture

China wins as usual when reserve currency status is abused.

Mon, 08/04/2014 - 18:44 | 5046286 nidaar
nidaar's picture

Nice. If other BRICS follow, when the time comes, they won't need to coordinate the dump, it will be all China cutting the rope for USD.

Tue, 08/05/2014 - 02:12 | 5047719 Oracle 911
Oracle 911's picture

CIA operative Herbert E. Meyer called for removal of Putin in other words for his assassination. This fucker (all CIA members are fuckers) and other fuckers from US deep state doesn't take in account one thing:

The power base of Putin are the citizens of Russia not the oligarch.

Therefore if Putin get killed the Russian oligarch end up as minced meat, and they know that.

Not to mention they see what the FED is doing with the value of the US$ and what the Western powers did with their money on Cyprus. So they got reasons and means to screw the Western "elites" where they can according Putin's plan.

Mon, 08/04/2014 - 18:35 | 5046260 zorba THE GREEK
zorba THE GREEK's picture

Not a bad move considering the goal of the Fed is to devalue the $ to keep from bankruptcy 

Mon, 08/04/2014 - 18:46 | 5046292 Clint Liquor
Clint Liquor's picture

Yes, the FED would love to devalue the USD. Unfortunately, China has said 'not while we hold trillions of it, (ie. The Peg) let us change most of it into Gold and then and only then'.

Mon, 08/04/2014 - 19:27 | 5046464 umdesch4
umdesch4's picture

Unfortunately, according to my back-of-the-napkin calculations, all the gold ever mined is probably valued at about $13 trillion USD at today's spot price. I don't know how many trillions in T bills the Chinese currently have. Last I heard a figure was $1.8T back in 2006, and I'm sure it has skyrocketted since then. So what do they do once they've exchanged it for all the gold in the world?

Mon, 08/04/2014 - 19:47 | 5046576 h0oS
h0oS's picture

You're assuming the price of gold stays static, it wont. As the demand rises the price of gold will also rise against T bills until you'll need ten wheel barrows full to buy a gold tag nut hanging from yellens ass...

Mon, 08/04/2014 - 20:13 | 5046676 Bossman1967
Bossman1967's picture

that's why they will keep selling their bullshit paper gold and then will print more ad that shit paper. gold price is going down but I'll keep buying the physical. onward

Mon, 08/04/2014 - 21:30 | 5047027 zaphod
zaphod's picture

This has and will continue to happen until the holders of paper gold finally grow a pair and call in for physical

Mon, 08/04/2014 - 20:58 | 5046911 umdesch4
umdesch4's picture

I believed that for years, decades even, but I've finally realized that the manipulation and all the bullshit paper will never stop. Never. They just keep shuffling the deck around on the manipulation. That certainly doesn't mean that I'm a "weak hand". I've had my share of boating accidents. But I'm not holding out hope that gold will see it's true value reflected in the spot price during my lifetime. I'm starting to get old. How's that go? The market can stay irrational longer than you can stay solvent...something like that.

Sat, 08/09/2014 - 17:18 | 5070860 heavy.metal
heavy.metal's picture

It's been going on for decades indeed. And what was the price of gold decades ago?

They may succeed at preventing its remonetization for a while, but in the meantime it keeps up with inflation like it's supposed to.

Price can't keep going down indefinitely because that would force a default when none is available for sale.

 

Sat, 08/09/2014 - 17:15 | 5070847 heavy.metal
heavy.metal's picture

You can't buy "all the gold in the world", because the vast majority of it is not for sale at any dollar price.

Even if the Fed went berserk buying gold with printed dollars, it wouldn't be able to purchase even 10% of it.

 

Mon, 08/04/2014 - 19:55 | 5046602 Pie rre
Pie rre's picture

Do you know Connie Lingus?

Mon, 08/04/2014 - 22:27 | 5047289 Sokhmate
Sokhmate's picture

No. But I do know colonel Angus

Mon, 08/04/2014 - 18:38 | 5046265 Robot Traders Mom
Robot Traders Mom's picture

Even America's own 'allies' are abandoning the Dollar. Bilateral trade between China and Germany was well over $150 BILLION last year http://english.cntv.cn/2014/07/08/VIDE1404795001241252.shtml

This is a scary time to live in. Nobody knows what how desperate the US oligarchs will get as their grip on global power fades...

Mon, 08/04/2014 - 19:19 | 5046424 world_debt_slave
world_debt_slave's picture

what would robot trader say?

Mon, 08/04/2014 - 19:49 | 5046582 centerline
centerline's picture

BTFD.

Tue, 08/05/2014 - 12:22 | 5049314 Kirk2NCC1701
Kirk2NCC1701's picture

RTM, that is one scary avatar.

Mon, 08/04/2014 - 18:39 | 5046271 Quinvarius
Quinvarius's picture

Or they all just mysteriously know what bet to make regarding the Hong Kong Dollar peg.

Mon, 08/04/2014 - 18:39 | 5046273 Bankster Kibble
Bankster Kibble's picture

Hasn't anyone yet told Obama that the more he sanctions Russia, the faster people move away from the dollar?

Mon, 08/04/2014 - 18:49 | 5046305 souljaboy
souljaboy's picture

Yeah. It's almost as if he wants them to move away from the dollar. But that couldn't be true.

Mon, 08/04/2014 - 18:59 | 5046327 nscholten
nscholten's picture

you may be on to something there.....

Mon, 08/04/2014 - 19:13 | 5046390 The Alarmist
The Alarmist's picture

What really matters is that the USD remain freely convertible to the 26 or 27 versions of Pesos that are remitted home to bring up the rest of the family.

Mon, 08/04/2014 - 18:48 | 5046279 bbq on whitehou...
bbq on whitehouse lawn's picture

Hong Kong trades in US $. What, is this impressive.
When they trade only in gold coins that will be impressive.
Untill then, Its all US DOLLARS. My stamp means i have an army willing to die for me; even walk off that cliff watch.
All needs be done, is say you will never accept US paper for anything again.
Then let the shit show, begin.
Or just nuke somplace an call it a day.

Mon, 08/04/2014 - 18:44 | 5046284 SheepDog-One
SheepDog-One's picture

These Russian folks are just acting insolent towards The One and his sanctions....how dare they.

Mon, 08/04/2014 - 18:45 | 5046290 bbq on whitehou...
bbq on whitehouse lawn's picture

No they aren't. Hong Kong has a US Dollar PEG. Its stil US Dollars. Still US paper. Still stupid. Just stupid in a new suit.

Mon, 08/04/2014 - 21:38 | 5047064 realWhiteNight123129
realWhiteNight123129's picture

It is a pegged currency, what matters it is that the currency HKD is redeemable in something (which happens to be USD), but the only place on hearth which could swiftly come back to Gold standard is Hong-Kong, because no gov debt, resonable consumer debt, well capitalized bank, and the HKD is not a fiat money. it could be pegged to anything else tomorrrow and it would adapt fast. Actually since the 1930 teh HKD was pegged and depegged and repegged from Silver to Sterling, then off Sterling than to Dollar and depegged frmo Dollar and then Floated and then repegged to USD. The Hong-Kong banking system is the banking system with the least crisis since the 1930s. Better than Canada. 

Mon, 08/04/2014 - 23:06 | 5047413 laomei
laomei's picture

And the next peg will end up being to RMB.

Mon, 08/04/2014 - 18:46 | 5046295 Sudden Debt
Sudden Debt's picture

Job well done Obama.... Up to the next...

Mon, 08/04/2014 - 18:48 | 5046303 Skeptical_Investor
Skeptical_Investor's picture

If the Russians buy HK dollars for USDs then HK would have too many USDs and would need to sell some to maintain their peg, not buy some. The article makes no sense at all.

Mon, 08/04/2014 - 18:55 | 5046314 bbq on whitehou...
bbq on whitehouse lawn's picture

No they have USDs, all they are doing is getting bank notes in favor, for them.
Say i have 100milion in US paper, i go to a HK bank that will take that paper and give me a credit on HK$. HK bank uses that paper to take out loans and other non-sense to hedge the HK$.
All of this is in house and never, ever hits the tape.
Thats why its ok, and is print.
Tell me im wrong. Hit me.

Tue, 08/05/2014 - 06:56 | 5047929 Apostate2
Apostate2's picture

See this:http://www.thestandard.com.hk/news_detail.asp?we_cat=9&art_id=138553&sid...

Or even better do your research via the HKMA

Simon's hair is always endangered by a light.

 

 

Mon, 08/04/2014 - 21:52 | 5047129 realWhiteNight123129
realWhiteNight123129's picture

Aie aie, no no! The HKMA works like the BoE and the Mint in XIX century UK. There is a bid and ask, right now we have the equivalent of a lot of people bringing their bullion to be minted for BoE notes. The mint would mint bullion into M0, that would increase the quantity of M0 in the circulation. Same here today, the HKMA creates new HKD as it gets USD.

The market decides if there are too many HKD in circulation. At that point people redeem their HKD for USD, so the market sells HKD, for USD, the HKMA does the exact opposite inverse situation as it doing right now with the inflows. When there are outflows, the HKD currency in circulation is reduced and the pool of the HKMA is drained of USD. As the currency supply shrinks, the market forces interest rates upwards. HKMA can not control interest rates, the market does.

 

Right now we have an expansion of the HKD currency supply, not a contraction, so the HKMA currently has to buy all the USD that are presented to them and create new HKD sold to the people who brought their USD. Similarly to people bringing their bullion in the XIX century willing to get those minted into coins (money), or some people sending bullion to BoE and getting BoE notes for it. The BoE would increase its pool of bullion in exchange for new BoE notes creates. Here we have the same, the HKMA increases its pool of USD for new HKD created.

Tue, 08/05/2014 - 01:24 | 5047682 bid the soldier...
bid the soldiers shoot's picture

Hong Kong is a part of China.  China has over 2 trillion USD under the matress. It's hard to believe they want any of their provinces to accumulate more. 

Under what agreement with whom does the HKMA have the HKD involved in an inverse relationship with the USD?  Is the English pound or the Euro involved or just the USD?

Is the HKMA independent from Beijing?  

Tue, 08/05/2014 - 03:06 | 5047772 Ghordius
Ghordius's picture

yes, the HKMA is independent from Beijing, and the peg to the USD is there since 1983. A simple affair, actually, the HKMA. Just buys USDs and prints the equivalent in HKD. Beijing did the same with great gusto, up to trillion-sized reserves, after all

Tue, 08/05/2014 - 12:56 | 5049517 bid the soldier...
bid the soldiers shoot's picture

 

"the HKMA is independent from Beijing"

Okay, if you say so.  No winking or nudging from the Forbidden City.

Nothing overtly or coverly remarkable to report after the the return of Hong Kong to China 1997.

What you see, is what you get.

 

 

 

 

Tue, 08/05/2014 - 00:44 | 5047628 bid the soldier...
bid the soldiers shoot's picture

 

 

BINGO

The only reason for Hong Kong to buy dollars is to keep the dollar's value well above the Chinese renminbi and keep America's exports from being bought anywhere.

The editors here are oligarch-happy and see them behind every blini and samovar.

Mon, 08/04/2014 - 18:57 | 5046318 orangegeek
orangegeek's picture

doom and gloom at bottoms

 

euphoria at tops

 

short the markets and long the USD

 

http://bullandbearmash.com/chart/dollar-monthly-breakout-started-euro-br...

 

USD monthly breaking out

Mon, 08/04/2014 - 18:59 | 5046326 Escrava Isaura
Escrava Isaura's picture

I just down voted you!

Happy Now?

Mon, 08/04/2014 - 19:51 | 5046585 centerline
centerline's picture

long both.

Mon, 08/04/2014 - 19:08 | 5046357 tony wilson
tony wilson's picture
BUSTED! Kiev's U.S. 'Satellite Images' of Ukraine Are From A 'Video Game'!

funny and kind of desperate yes no

 

https://www.youtube.com/watch?v=p3ixCCfb7eU

Mon, 08/04/2014 - 19:09 | 5046364 Gringo Viejo
Gringo Viejo's picture

Ebola, ISIS, Gaza, Ukraine,De-dollarization etc...... Gold & Silver down (again)........ US oligarchs must be shiting their pants waiting for the next shoe to drop...... When they loose "control" of events...... Should be quite a show.......... Keep stackin'...............

Mon, 08/04/2014 - 20:13 | 5046678 F0ster
F0ster's picture

It reminds me of kids birthday party pinada... Whack, whack whack!

Mon, 08/04/2014 - 19:14 | 5046396 WTFUD
WTFUD's picture

Will Ye No' Come Back Again? NO!

Mon, 08/04/2014 - 19:18 | 5046416 world_debt_slave
world_debt_slave's picture

paper is paper, go for the gold

Mon, 08/04/2014 - 19:40 | 5046485 MatrixLinx
MatrixLinx's picture

I read that Hong Kong may stop their peg to the US dollar and if and when they do so so that currency will revalue as much as 40% higher. So this would be a good hedge and investment opportunity.

http://www.sovereignman.com/trends/it-looks-like-hong-kong-may-soon-end-...

Mon, 08/04/2014 - 19:41 | 5046551 starman
starman's picture

Hahaha American foreign policy at its best! 

Mon, 08/04/2014 - 19:52 | 5046589 Spungo
Spungo's picture

"So what do they do once they've exchanged it for all the gold in the world?"

Say the yuan is backed by gold at a certain exchange rate. Doing this after all of the swap agreements and trade systems are up and running would encourage the world to quickly adopt the new chinese currency and stop using the US currency.

Mon, 08/04/2014 - 20:09 | 5046657 kchrisc
kchrisc's picture

Sounds prudent to me, as if the Rothschild Fed doesn't steal it via inflation, then the DC US will via violence.

Mon, 08/04/2014 - 21:33 | 5047032 realWhiteNight123129
realWhiteNight123129's picture

This is absolutely a BRILLIANT move. Why? Because techically the Hong-Kong balance is the same as the USD (pegged), however Hong-kong does not ahve the banking problems of the US or consumer debt problems or Gov debt problems of the US. So, if the USD goes awful, the billionaires have a call option.

 

Now can the US prevent Hong-Kong to hold USD after and impose sanctions of hte whole of Hong-Kong. Technically yes, but that would force Hong-Kong to depeg the HKD from USD. And also it would send a signal that no dollar holdings are safe and so massive dumping ensues.

Check mate !!! Those guys advised by Jack  Lew are fucking monetary retards.....

 

Tue, 08/05/2014 - 01:47 | 5047702 bid the soldier...
bid the soldiers shoot's picture

 

 

Now can the US prevent Hong-Kong to hold USD after and impose sanctions of hte whole of Hong-Kong. 

Just of of curiosity, what is your mother tongue? 

 



Tue, 08/05/2014 - 06:24 | 5047901 realWhiteNight123129
realWhiteNight123129's picture

Not English as you can tell obviously! Mother tongue is French.

Tue, 08/05/2014 - 12:27 | 5049334 Kirk2NCC1701
Kirk2NCC1701's picture

Late post... Only last week Simon Black had a post and a podcast that advised people to move some of their USDs into HKDs.

Looks like Simon has the ears of Russian Oli's also.

Tue, 08/05/2014 - 13:32 | 5049736 bid the soldier...
bid the soldiers shoot's picture

 

 

"THE DUMMIES' GUIDE TO CHINA'S RELATIONSHIP WITH THE US DOLLAR."

China possesses TWO THOUSAND BILLION USD.  While it holds those USDs, it wants the value of the USD to higher than 'Tiangong."

On the other hand, it is the considered opinion of the Bank of China that China does not need any more USD.

Confucius Say  whenever necessary to keep USD out of shitter, buy it with Hong Kong dollars and not yuan.

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