Chris Burford wrote:
> Hong Kong led a rally in world stock exchanges at the end of last week, but
> for the rather dubious reason that it had intervened in the market.
>
> The government has been criticised this weekend by Martin Lee, head of the
> Democratic Party, for damaging credibility in Hong Kong's free market and
> status as a "world financial centre".
>
> The government claimed it had not departed from its non-interventionist
> policy but was thwarting what looks like a highly technical "sustained and
> heavy" assault on the HK dollar with evidence of hedge funds attacking the
> currency to benefit from short positions in the Hang Seng futures markets.
> Financial Times: "Under this strategy, hedge funds sell the Hong Kong
> dollar, forcing up interest rates through the automatic adjustment
> mechanism of the territory's currency exchange board system. Higher
> interest rates depress the stock market, providing profits for short
> positions in which investors sell shares and futures contacts they do not
> own in anticipation of a fall in their value."
>
> How often Hong Kong can do this remains to be seen.
>
> I am reporting this item because I would still claim that Hong Kong has
> been surprisingly resilient. But this may be a sign that it is cracking.
>
> Chris Burford
>
-- Mark Jones http://www.geocities.com/~comparty