Tsang plans more curbs
MondayÿÿSeptember 7ÿÿ1998
DAVID IBISON
Financial Secretary Donald Tsang Yam-kuen will reveal further measures to curb speculative activities at today's meeting of the Legislative Council's Financial Affairs Panel, government sources said yesterday.
Mr Tsang - alongside representatives from the Hong Kong Monetary Authority (HKMA) and the Financial Services Branch - is to address the panel and answer legislators' questions on the Government's intervention.
Sources confirmed Mr Tsang would bring legislators up to date on the Government's moves to curb speculative activities and would reveal additional measures aimed at penalising speculators.
"This weekend's measures were not the end," the source said.
"The Financial Secretary said previously he would introduce a range of measures, some of them administrative and some of them legislative, and [today] he is likely to offer further details of these."
It is understood the Government feels the HKMA, the stock market and the futures market have taken action to help it curb speculation and is now looking to the Legislative Council for a demonstration of support.
Other sources said Mr Tsang would ask the council to back legal changes desired by the Government to give it "additional leverage" over both markets.
It was revealed last week the Government was in the early stages of putting together proposed legal changes that would allow it to "direct" the stock and futures markets.
It is understood the Government had wanted to make changes at both exchanges and felt frustrated when representatives of the exchanges blocked the proposed alterations.
For example, the Government had its attempts to increase margin payments frustrated by the futures exchange before they were eventually raised 50 per cent on positions of more than 10,000 contracts.
Sources said the Government resented having action it was keen to take as quickly as possible delayed by detractors within the exchange, and wanted to rectify the situation.
It has dismissed claims it is taking a more authoritarian stance towards the markets, saying instead it wants greater flexibility in its action to deter speculation on both exchanges.
As part of its planned measures, the Government would like to have all margin payments made in Hong Kong dollars and to limit open interest to 10,000 contracts, both of which the futures exchange is understood to be less-than-keen to implement.
Sources said the Government wanted to increase its powers so that it could push through these changes, even if the exchange in question disagreed with the proposed alterations.
The Government's decision to seek the support of the Legislative Council comes on the heels of a seven-point package of measures designed to further tighten control over speculators - the latest in a series of moves that began late last month.
The central element of the weekend's package was the introduction of a "convertibility undertaking" for all licensed banks in the SAR which allows them to convert Hong Kong dollars into US dollars at a fixed rate of $7.75.
Other measures were aimed at reforming the way banks obtain overnight funding from the HKMA by replacing the Liquidity Adjustment Facility with the Discount Window.
It is understood this measure will increase speculators' costs should they try to manipulate local interest rates as part of an attempt to move share prices and benefit from short positions.
Contrary to expectations, Mr Tsang will not reveal how much the Government has spent so far intervening in the markets at today's meeting, the source said.
It is estimated up to $120 billion may have been spent supporting the market, although the figure remains unsubstantiated.
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