Man Who Called China's Boom and Bust Now Warns of Crisis Risks
- Hao Hong at Bocom International sees strains in property, debt
- ``All roads to hell are paved with positive carry,'' Hong says
A pedestrian holding an umbrella walks past a pedestrian footbridge featuring an electronic stock ticker at night in the Lujiazui district of Shanghai, China.
Photographer: Qilai Shen/BloombergOne of the few forecasters to predict both the start and peak of China’s equity boom is now warning the nation will be buffeted by the same forces that caused financial crises around the world over the past four decades.
Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, says a shortage of dollars was the common feature in the oil rout in the 1970s, Latin American debt turmoil in the 1980s, the Asian currencies collapse in 1997 and the global crisis in 2008. Next year will see Federal Reserve interest-rate increases, an improving U.S. current-account balance and a stronger greenback, putting strains on the most-leveraged parts of the world’s second-largest economy, he says.
"Historically, every time the U.S. current account improved, concurrent with dollar strength, some country somewhere in the world plunged into some sort of crisis," Hong said. “The pressure from a Fed tightening and thus a dollar liquidity shortage scenario will more likely show up” in Hong Kong property as well as China’s online lending and high-yield corporate bonds, he said in an interview.