Hong Kong reserves spent for stocks, campaign to drive out market speculators
Copyright © 1998 Nando.net
Copyright © 1998 The Associated PressHONG KONG (October 22, 1998 3:44 p.m. EDT http://www.nandotimes.com) -- Hong Kong financial authorities spent $4 billion of their reserves in a massive stock-buying spree aimed at driving out market speculators.
The Hong Kong Monetary Authority, the territory's de facto central bank, announced Thursday that Hong Kong's foreign currency assets stood at $88.4 billion at the end of September, a sharp fall from $92.1 billion at the end of August.
Thomas M.K. Chan, spokesman for the HKMA, told Dow Jones Newswires that the $4 billion was used "to fund investment in Hong Kong stocks."
Despite the drawdown, Hong Kong's reserves remain the third largest in the world after Japan's and China's, an official statement said.
In August, the Hong Kong government intervened in the markets, scooping up shares and futures contracts in an effort to drive up share prices to levels at which speculators -- who bet the market would fall -- would be stuck with huge losses.
The climax of the unprecedented intervention came Aug. 28, when turnover at the Hong Kong Stock Exchange hit a high of 79 billion Hong Kong dollars ($10.1 billion).
Economists, analysts and politicians sharply criticized the intervention, saying it damaged Hong Kong's reputation as a free market and wasted taxpayers' money. The government claimed victory and later introduced a series of regulations to restrict speculative activity and stabilize the markets.
"There will be no need for them to intervene again since they've put other measures in place to safeguard the integrity of the Hong Kong dollar," said John P. Sevilla, vice president for credit research at Salomon Smith Barney.
Since existing regulations on disclosure do not apply to the government, officials have held out on details of the government's massive stock and futures holdings accumulated during the stock-buying spree.
The HKMA said any premature disclosure could wreak further havoc in the markets and that it would disclose the details only after speculators have left the Hong Kong markets. Holdings will be disclosed only in late October by an independent company established by the government to manage the accumulated securities.
Copyright © 1998 Nando.net