William Ackman of Pershing Square Capital Management L.P., the luncheon speaker at CNBC and Institutional Investors delivering alpha conference held in New York today, is making a big bet on the Hong Kong dollar. The Hong Kong dollar is pegged to the U.S. dollar and is allowed to trade within a trading band. The Hong Kong Central Bank prints money to keep the Hong Kong dollar in a band. The Hong Kong economy is very strong and with 6% growth, 3% unemployment and the currency is way undervalued. They also have pegged interest rates near 0 just like in the United States.
Ackman believes the Hong Kong Central Bank will soon be revaluing the Hong Kong dollar 30% higher at some point in the future to stop the economy in Hong Kong from overheating and the real estate market from becoming a bubble.
As you can see from the 60-minute chart below, the market may already be reacting to Ackman’s prediction.