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Hong Kong may not be the largest financial center in Asia. Hell, it’s not even the largest financial center in China anymore. But it is still the regional hub for the hedge fund industry, boasting more funds that Singapore, Japan or Asia, and more assets under management therein than all of the others combined.

And most of those hedge fund managers probably expected it to stay that way for another couple of decades, as under the treaty that returned Hong Kong to China in 1997, Beijing was bound not to incorporate the city-state into its own, rather more repressive political regime for 50 years. But China’s a good deal more powerful now than it was 23 years ago, and Britain a great deal less influential, and so it decided to accelerate things a bit. So, uh, how much should those hedgies worry?

“We are a very free society, so for the time being, people have the freedom to say whatever they want,” [Hong Kong chief executive Carrie] Lam told reporters….

Very reassuring, Carrie. I’m sure it will calm everyone’s nerves and definitely not have anyone packing their bags.

“Hong Kong as we know it is dead,” said an adviser who works with hedge funds in the city and elsewhere in the region. “It will become just another city in China. The hedge fund community will move on to Singapore and elsewhere….”

One trader said Beijing’s move had forced him to set a timetable for leaving Hong Kong within a few years, noting that the language used by Beijing suggested short-sellers and activist investors could be among those vulnerable to prosecution…. Mainland Chinese regulators are known for targeting foreign entities when markets fall….

Another hedge fund manager said “we’re a little bit nervous” about the political impact of how financial regulations were enforced. Equally important, the fund manager said, was “objectivity of information not coerced by politics”.

But how nervous are you about getting caned for licking a subway pole?

Hong Kong hedge funds explore exit as national security law looms [FT]



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