or, How the Hang Seng Looks Better with Cheap Makeup On and you don’t look too closely

Remember this chart?

This was featured in my post on The GDP Discrepancy in Long Term Stock Returns. The outperformance of the HSI essentially since 1984 has been a highly influential feature of my studies so far. To cut a long story short, this is because of the sneaky and gradual debasement of the USD, which the HKD has been pegged to since 1983.

Bloomberg would not let me show the data all the way back to 1975 since the STI in its current incarnation only goes back about 10 years. Still we can observe the effect. Unadjusted for currency differences, the STI and HSI would be represented by the Green and the White respectively. In terms of price return, they are both about 84% for ...