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Hong Kong Unmasked

Here’s a new term for you this week: personal identity surveillance prosthetic. For $200 you can buy a human like mask (shown in the image above) from URME Surveillance to help thwart facial recognition software. This is the bizarre futuristic world we find ourselves in today.

In the west, we are preparing for this month’s Halloween events where purchasing masks of our favorite movie characters or politicians is a national pastime. In Hong Kong, the purchase of masks has now become far scarier than any Halloween horror movie. On Saturday, October 5th, Carrie Lam, the highly criticized Chief Executive of Hong Kong, invoked emergency powers not used in over 50 years to ban the wearing of face masks.

Lam is considered by many Hong Kongers as a puppet of Beijing and it did not help that around the same time she invoked the ban she was attending the 70th anniversary of the Chinese Communist Party in Beijing. Not surprisingly the mask ban has only fueled the protests and sparked Hong Kongers to find creative mask alternatives such as the URME mask.

We currently see no end in sight for the conflict between Hong Kong and China and in fact we believe that things will escalate significantly. Hong Kong has strategically used the trade war tensions between the U.S. and China as a way to involve the U.S. in their plight. Yesterday over a million people came out into the streets of Hong Kong, waving American flags and pleading with the U.S. to pass bill H.R.3289, known as the Hong Kong Human Rights and Democracy Act of 2019. Additionally the protestors have reiterated their five demands:

  1. Full withdrawal of the extradition bill
  2. A commission of inquiry into alleged police brutality
  3. Retracting the classification of protesters as “rioters”
  4. Amnesty for arrested protesters
  5. Dual universal suffrage, meaning for both the Legislative Council and the Chief Executive

We simply see no way for those five demands to be met when over the weekend Chinese President Xi Jinping said that any attempts to cause division in China “will end in crushed bodies and shattered bones.” President Xi did not comment on Phase 1 of the trade deal with the U.S. but instead focused on letting the world know that he sees Hong Kong and Taiwan as part of China and will not tolerate outside influence or opinions on the matter.

We also believe that markets are starting to price in the growing conflict. Looking at the performance of Hong Kong’s stock market over the last year versus China, you can see that Hong Kong can barely stay above water for positive returns. China is flying much higher but how much longer will that last as their economy slows and their greatest access point to international markets, Hong Kong, sees increased capital flight?


When we look at the next closest financial center to Hong Kong its undisputedly Singapore. Many market pundits have been overly focused on the exchange rate between the U.S. and Hong Kong which is controlled in a very tight band to maintain their peg. More interesting to us is looking at the exchange rate between the Singapore dollar and the Hong Kong dollar. When we look at the SGDHKD exchange rate over the last couple of months the movement is apparent. Will this continue?

We think the probability is for more flight capital to Singapore which makes trading their currency an interesting short to medium term macro position for us.


In summary Hong Kongers are far from their goals of ensuring the long term viability of their democracy and we should all care about the outcome for them.

As you go about your Halloween festivities this month remember that wearing a scary mask is not as scary as not being able to wear a mask in Hong Kong.

P.S. Please click on the link if you’d like to read our original article on Hong Kong titled The Last Orchid Tree