Hong Kong Soars

Chris Burford cburford at gn.apc.org
Sun Sep 6 23:54:18 PDT 1998

Asian markets have risen strongly this morning. Part of this is the effect of the weakening of the dollar, helped by Greenspan's public hint that interest rates may come down. (He is thereby backing the strategy for reflating the world economy by printing dollars to fund free imports to the USA!)

But the Hang Seng rose by percentage even more than the Nikkei. It is dangerous to go on any one movement and I do not have week to week figures, but my impression is that over the last few weeks where the Hong Kong Administration has been trying to intervene in the markets the falls have been less than expected and the rises more.

This rise has been even more significant since it comes at a time when emerging market gurus like Mobius have issued public warnings about the danger to Hong Kong's long term levels as a result of intervention, and the authorities have stepped in to guarantee the peg of the HK to the US dollar, while saying it will not introduce capital controls.

What we are seeing here is a sophisticated intervention in the capitalist market which squeezes out short-termism, especially in relation to volatile financial movements. The market does not appear to have punished this; rather the reverse.

Capitalism is still capitalism but the Chinese Asian economies look as if they are coming out of this crisis having struck a blow against short-termism. This is a significant victory in the fight back against neo-liberalism.

Chris Burford

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