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To: kech who wrote (14228)	8/28/1998 10:32:00 AM
From: Ramsey Su	Read Replies (2) \| Respond to of 152472

Tom, chicken little here reporting from the hen house. months ago I started worrying about the market, mainly because I cannot rule a melt down style correction. Yesterday's reaction to Russia is totally uncalled for. The biggest economic bomb is about to explode in HK. HKMA struggled to keep the HS index up there through August expirations (last night). Monday is WWIII (Sunday night). There is no sign that the shorts are throwing in the towel. Without the HKMA, there are no buyers. I have asked anyone who can remotely answer the question and receive no credible responses. "What happens if HKMA fails?" From SCMP Friday August 28 1998 Soros fund joins bets against HK$ SHEEL KOHLI in London and ENOCH YIU and agencies Sources close to the Quantum Fund, the world's best known hedge fund run by United States financier George Soros, yesterday confirmed it had made sizeable bets against the Hong Kong dollar. Traders said several other hedge funds - including Julian Robertson's Tiger Fund and Louis Bacon's Moore Capital - had also been active in Hong Kong in recent weeks. Unconfirmed rumours yesterday suggested Mr Soros may be about to visit Hong Kong. Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong said he had not received a request from Mr Soros for a meeting. "I don't know whether he is in Hong Kong," he said. "I don't think I would have time to meet him. We do not have any plans to meet each other." A government spokesman said he too knew of no request from Mr Soros to meet Financial Secretary Donald Tsang Yam-kuen or any other local officials. Mr Yam yesterday refused to say how much of the Exchange Fund had been used to intervene in the stock and futures markets, but said he expected the foreign exchange reserves to be lower in August as a result. Yesterday prime brokers - traders from blue-chip banks which specifically service large, highly leveraged alternative investment clients - said the recent pledge by Mr Tsang to "drive those speculators out of the market" was being seen as a virtual green light to bet against the dollar. A trader at a key US bank said: "From an investor's point of view, the calculation is simple. Who has got more funds at their disposal? The market, or the Hong Kong Government." Funds were said to be making large selling bets on the Hong Kong dollar forwards, and simultaneously short-selling the Hang Seng Index. Quantum Fund manager Stanley Druckenmiller indicated the Government could only lose, as basic economic fundamentals implied either higher interest rates or a lower valuation for the Hong Kong dollar. "I'm baffled at what they are doing," he said in an interview with CNBC. "But if they think the fundamentals in their area have turned, the gamble they are doing here will probably pay off and they will have won the war, they're saying, over speculators." He said the Quantum Fund had committed a mixture of client funds and proprietary money against Hong Kong as it believed the currency and stock market were still high. "If they're [the Government] wrong on the fundamentals, all they'll be doing is providing profits for speculators," he said. "From our perspective, no matter what they want to do in their market, when they wake up on Monday morning they're still going to be in a depression." Mr Soros is best known in Asia for being personally vilified last year by Malaysian Prime Minister Mahathir Mohamad for betting against the Malaysian ringgit and stock market. Mr Druckenmiller appeared confident Quantum's latest bet would work. "We have US$20 billion in total, we have our own capital involved, and I just don't see us as being able - just as I don't see the Hong Kong Monetary Authority being able - to buck the trend," he said.

To: kech who wrote (14228)	8/28/1998 10:36:00 AM
From: Ramsey Su	Read Replies (2) \| Respond to of 152472

(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.