HK spree appalled Peking

`IoS' probe reveals that government raid on shares was unsanctioned

ZHU RONGJI, China's premier and economic tsar, was appalled by the Hong Kong government's unprecedented plunge into its stock market last August, according to sources in the former colony close to the Peking government.

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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before