HSBC warns of hot money exodus from Britain under 'siege'

HSBC warns of hot money exodus from Britain under 'siege'

By Ambrose Evans-Pritchard
Last Updated: 10:35pm BST 05/10/2007

HSBC, Britain's biggest bank, has warned that Britain faces a stark "de-rating" by investors in coming months as growth slows and funds begin to lose confidence in the country's economic management, triggering a mass exodus of "hot money" from the City.

Events such as the Northern Rock debacle have eroded confidence in Britain's economic management

"Sterling's outlook is increasingly taking a turn for the worse. A deeper downward move against a broad range of currencies is on the horizon," said the bank in a new report, "Kingdom Under Siege".

It expects the pound to fall from around $2.04 to $1.76 against the dollar over the next eighteen months, even though the dollar itself is in danger of losing its status as the world's "anchor currency".

HSBC warns of hot money exodus from Britain under 'siege'

Well, what's this? US$ is losing its worth, now British pound is endangered... Meanwhile, Dow Jones and other stock markets are skyrocketing. I don't understand it at all. Anyone with some knowledge on economics here? Care to explain this phenomena?

Originally posted by Duby78
Meanwhile, Dow Jones and other stock markets are skyrocketing. I don't understand it at all. Anyone with some knowledge on economics here? Care to explain this phenomena?

I can help explain why the DJIA is still doing quite well. It is composed of only 30 companies, and they are some of the biggest companies in the world and make a lot of overseas income. So a falling dollar helps their bottom line as reported in dollars. If you look at some of the more broader indices, they don't look as good as the Dow. The Nasdaq Composite is no where near its high from years back in the Internet bubble times.

Well, thanks for your answer, much appreciated. But US$ going down is not good thing for the entire US economy, let alone for ordinary people, I assume.

Anyway, what is the reason of US$ losing worth? Maybe because too much of fiat money was injected into banking system to bolster the liquidity of markets? If this is correct, then what we're seeing is solvency crisis. Right?