The plunge left the Hong Kong authorities owning around 10 per cent of all blue-chip shares. Until now it has been generally assumed that Peking gave full backing to the market intervention. However, the Chinese leadership was not only very uneasy about the actions taken but fearful that Peking would have to foot the bill if the share-buying spree caused a collapse of confidence in the former colony.
On being told of the Hong Kong government's decision to intervene in the stock and futures markets, as part of a ploy to prevent speculation in the local currency, a furious Mr Zhu said: "If I did that, I would have lost my job."
China's real views about the biggest single government stock market intervention in history came to light during a two-month investigation by The Independent on Sunday, which reveals that the Hong Kong government was driven by panic when it plunged into the equity markets, spending more than pounds 9.6bn in two weeks.
After the spree was over, it started a disinformation campaign to cover its tracks and muster support for its actions.
Two of the three senior officials responsible for going into the markets - Joseph Yam, head of the Hong Kong Monetary Authority, and Sir Donald Tsang, the financial secretary - have repeatedly alleged that Hong Kong was facing an organised conspiracy by foreign speculators determined to profit by forcing a currency devaluation.
Mr Yam, in particular, put pressure on the watchdog Securities and Futures Commission to come up with evidence of a conspiracy and market manipulation. The SFC identified considerable speculative activity in the market but came up with no evidence of wrong-doing or manipulative practices that broke the rules.
Moreover, the SFC found that just under half the speculative activity was coming from local sources as opposed to big-league foreign players. The SFC's report on this matter never saw the light of day.
On 28 August, the day the government pushed stock market turnover to a record HK$79bn (pounds 6.3bn), its share buying was so intense that it had no limit and greatly exceeded the amount the government thought it would have to spend.
It has now established a com- pany to manage its share portfolio and is holding a merchant bank "beauty contest" as it seeks advisers to help dispose of its holdings.Reuse content