(cont)
does this look like a strong picture? Sorry if you are not sleeping well. Just want you to know that I did not totally take my own advise. Though I have more cash now, I still have far more in equities.
Ramsey
Friday August 28 1998
Massive buying sets
stage for August
futures showdown
STEWART OLDFIELD and PETER CHAN
The Government offered to buy every blue-chip
stock at Wednesday's closing price or above all
day yesterday to counter massive selling pressure,
ahead of today's expiry of the August futures
contract.
The salvo pulled the Hang Seng Index up 1.13 per
cent to 7,922.97 points as turnover hit $22.96
billion, the highest since last November. Short
sales jumped to $1.73 billion, their highest this
year.
The ninth day of intervention saw the Government
become up to a 2 per cent stakeholder in Hong
Kong's second-biggest company, Hongkong
Telecom, costing almost $4 billion, in the face of
record trading volumes on the counter.
"It's the re-nationalisation of Hong Kong," said
one trader. "It's an insane crusade," said another.
Through the Hong Kong Monetary Authority, the
Government had an average 6 million to 15 million
in outstanding bids for shares in blue-chip stocks,
including HSBC Holdings, brokers said.
On Hongkong Telecom, where selling pressure from
long-term investors was greatest, the Government
at times had bids for more than 100 million shares,
they said. Blue chips accounted for about 95 per
cent of the day's trade: just four - HSBC,
Hongkong Telecom, Cheung Kong and Hutchison
Whampoa - accounted for 59.88 per cent.
Half an hour into the morning's trade, the prices
of all Hang Seng Index stocks were unchanged
from Wednesday's close as the Government
absorbed the pressure, despite turnover of more
than $2 billion. Over the full day, the official
buying outpaced the levels seen since August 14,
when the intervention was launched.
Later in the day, the Government raised bids for
China Telecom and HSBC in an attempt to further
squeeze speculators.
Speculation has grown that the HKMA has
employed a mystery former hedge-fund employee
to co-ordinate its campaign to punish speculators
across the equity, futures and money markets. A
HKMA spokesman declined to comment.
The Government stands to make between $1 billion
and $3 billion from today's expiry of the August
futures contract if it can hold the market at
present levels, depending on the number of
long-positions they hold, brokers said.
However, the Government was seen selling down its
long-August position yesterday, despite remaining a
net-buyer.
On the futures market, the spread between the
August and the September contract widened to 140
points, with open interest centred on the
September contract.
In the money market, the HKMA did not release
funds until late trade, forcing most overnight deals
to be transacted at between 15 to 17 per cent.
Standard Chartered Bank regional treasurer
Stanley Wong Yuen-fai said the movement sent a
very strong signal that the HKMA wanted to see
rates remain at high levels today.
Brokers said the Government would maintain its
wall of buying in the stock market today to
maximise the pain on funds which shorted the cash
and futures markets at lower levels.
Celestial Asia Securities research manager George
Chan Lung-cheung said: "[Today] will be a huge
battle."
The Government has previously employed a strategy
of switching its buying between stocks and
brokers to confuse the market - in stark contrast
to yesterday's across-the-board buying.
The Government's demand for Hongkong Telecom
scrip placed on the market was so intense that the
bids were at times spread across more than three
brokers.
Mr Chan said: "In the past few weeks the selling
pressure concentrated on Hongkong Bank, today
the market shifted its selling focus to Hongkong
Telecom."
Brokers estimate that the Government has hedged
up to 20 per cent of its equity investments through
the sale of September futures, suggesting the
Government may try to hold the market at present
levels next month.
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