from ZeroHedge:

Even before protests over a controversial extradition bill sparked the tumultuous pro-democracy movement that swept across Hong Kong last year, the notion that the city’s freedoms were under threat, and that China would soon move to curtail them, had been gestating since the 2014 Umbrella Movement. Last Spring, before the movement began in earnest, Kyle Bass published a paper entitled “the Quiet Panic” about how Hong Kong was a ticking time bomb. A few months later, it exploded.

Over the past 16 months, expats haven’t been the only ones fleeing Hong Kong. Virtually everyone who can afford to move has at least considered the possibility of selling their once extremely valuable Hong Kong real estate and fleeing elsewhere, perhaps to New Zealand, or Australia, or Malaysia – or Taiwan, which is currently drawing up plans to welcome expats.

As we reported on Friday, as more prepare to move before China tightens its grip, Sing Tao, Hong Kong’s second-largest Chinese-language newspaper observed that Hong Kong residents have been exchanging more of their HKD holdings into foreign currencies at banks and money exchange counters on Thursday.

It got so bad that according to a follow up report from the SCMP on Saturday, the rush for US dollars forced money exchangers in Hong Kong to turn away hundreds of customers after running out of the currency amid fears the United States could end the city’s preferential trading status.

According to money exchange store owners, demand for the US currency surged this week after China’s legislature endorsed a resolution for its top legislative body to craft a tailor-made national security law for Hong Kong which would criminalize acts and activities of secession, subversion, terrorism and foreign interference.

In kneejerk response, HK residents – fearing the Hong Kong dollar could be unpegged from its US counterpart – rushed to convert their local currency into something they view as more stable: the US dollar.

Long lines promptly formed at money changers in a number of Kowloon districts including Tsim Sha Tsui and Sham Shui Po on Friday, as residents waited for shop operators to replenish their US dollar supply. Eric Wong Wai-lam, who runs Rich Bird Currency Exchange in Sham Shui Po, was forced to turn away 600 customers who wanted to convert their local banknotes to the US currency.

“There will be no US dollars for exchange until next Tuesday or Wednesday,” he told customers, adding that his shop could only serve those who had previously placed an order. He explained that demand for the US currency had increased 10-fold this week, with more customers looking to switch large sums – hundreds of thousands or even millions of Hong Kong dollars – at a time.

“The US dollar is out of stock everywhere. We’ve offered every last bit of our supplies to our customers,” Wong said adding that residents also sought alternatives such as the pound, Euro and Australian dollar. “People will take anything you have,” he said.

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