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To: Crimson Ghost who wrote (16803)	8/28/1998 9:33:00 AM
From: Ahda	Respond to of 116823

Friday August 28, 7:11 am Eastern Time INTERVIEW-HSBC's Bootle sees risk of world slump LONDON, Aug 28 (Reuters) - HSBC Group chief economist Roger Bootle said on Friday that he thought the risk of a 1930s-style global depression were definitely real, although he stopped short of actually predicting one. Bootle, known in Britain as the author of a 1996 book ''The Death of Inflation,'' said the financial crisis that is raging around the world is the worst in a quarter century. ''This is the most dangerous world crisis since the oil shocks of the 1970s,'' Bootle told Reuters. ''For the first time in my proefessional life the chances of a 1930s style slump have to be taken seriously.'' From an investment point of view he said it was the threat to Western stock markets that was of immediate concern. He added: ''We still are underestimating the size of those effects on economic performance. I think we're just at the beginning of the process. There are several stages to be played.'' One of those stages, he said, would be the emergence of falling consumer prices, mainly in continental Europe but also in North America. The crisis was emanating from Russia, where an economic crisis was intensifying almost by the hour, but the shockwaves outside Moscow were what were worrying economists. ''There are so many different elements to all this,'' Bootle said. These included: -- the straightforward economic impact of diminished demand emanating from the Far East, as well as the potential for direct economic impacts on Latin America, the Middle East and other parts of the world -- the impact on price behaviour -- the possibility of the rejection of free markets and so-called democratic principles in Russia, which could spread elsewhere around the world. ''The thing that really worries me is a really sharp slowdown in the U.S. economy,'' Bootle added. A key indicator of that, he said, would be the U.S. stock market.

To: Crimson Ghost who wrote (16803)	8/29/1998 2:06:00 AM
From: Alex	Respond to of 116823

Hong Kong Blows $7 Billion Supporting Stock Prices A wealth transfer from taxpayers to stockholders Hong Kong poured up to US$7bn of foreign exchange reserves into the stock market yesterday in an attempt to defend its currency as international markets fell sharply and the government forecast a severe recession. Turnover on the stock market ballooned to a record HK$79bn (US$10.2bn) as the government's fortnight-long battle against speculators entered its most critical day. Taxpayers' funds were used to keep the benchmark Hang Seng Index above 7,800, frustrating speculators who had used futures to bet on a lower close. While Donald Tsang, financial secretary, claimed the unprecedented government-buying a success, market participants were less convinced. "To me it's the King Canute syndrome," said Terence Mahoney, managing director of TCW Asia fund managers. "You cannot turn a tide away no matter how powerful you are." Under Hong Kong's currency board, which pegs the territory's currency to the US dollar, attacks on the Hong Kong dollar automatically trigger a rise in interest rates. The government's share-buying is intended to prevent a "double play" in which speculators sell Hong Kong dollars and profit from negative positions on the property-dominated stockmarket, which is especially sensitive to interest rate rises. Sellers descended on Hong Kong, cashing in on the government-led rally. Short-selling, or selling stocks investors do not own in the anticipation of buying them back at a lower price, was also widespread. John Seel, economist at Bear Stearns, noted: "Everybody who could took a short position." Mr Tsang had earlier announced that second quarter gross domestic product fell by about 5 per cent in real terms, and projected a contraction of 4 per cent for the full year. On Thursday, three of the territory's biggest companies reported steep falls in earnings. But the share prices of Cheung Kong, Hutchison Whampoa and Citic Pacific have benefited from the government's buying spree. The government began buying shares two weeks ago, pushing the Hang Seng Index up by about 1,200 points. Yesterday, the main focus for the intensified share buying was the expiry of August futures contracts. The expiry date forces owners to either settle their positions - some of which would have been loss-making - or to roll them over into September. The Financial Times, August 29, 1998