Hong Kong's HK$58bn bid to stem the selling
Saturday 29 August 1998
The purchases were the largest yet in Hong Kong's two-week-battle, using their huge dollar cash reserves to hurt speculators betting that the market and the HK dollar will fall.
Despite the huge intervention the Hang Seng Index fell 93.23 points, or 1 per cent, to 7829.74, as the government accounted for about three- quarters of yesterday's record HK$79bn of trading.
Reports that renowned hedge funds, such as George Soros' Quantum Fund, Julian Robertson's Tiger Fund and Louis Bacon's Moore Capital, were now betting against the Hong Kong dollar by taking short positions, heightened the market's concerns.
Many fund managers say they are reluctant to buy as long as the government, not investors, determines prices. If the government steps back now, the Hang Seng Index is almost sure to plunge 15 per cent or more, investors said.
The government now owns about 6 per cent of the entire Hong Kong market, ranking among the largest shareholders of HSBC, Hong Kong Telecommunications and other benchmark companies.
Hong Kong has spent almost 13 per cent of its currency reserves - the world's third-largest - to buy stocks and safeguard the Hong Kong currency's 15-year-old link to the dollar. The Monetary Authority has about $84bn left.
Separately, Hong Kong's economy shrank 5 per cent in the second quarter, according to data released after the market closed, meaning Hong Kong is officially in a recession.
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