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To: IQBAL LATIF who wrote (20085)	9/7/1998 3:11:00 AM
From: flickerful	Read Replies (2) \| Respond to of 50167

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. scmp.com

To: IQBAL LATIF who wrote (20085)	9/7/1998 3:17:00 AM
From: flickerful	Respond to of 50167

Hong Kong takes action over currency speculation By John Ridding and Louise Lucas in Hong Kong Hong Kong will today implement measures designed to bolster the territory's linked exchange rate mechanism, which has come under severe pressure from speculative assaults and regional financial turmoil. The measures, announced at the weekend, aim to increase liquidity in the interbank money market and include an explicit commitment to all banks to convert Hong Kong dollars into US dollars at a rate of HK$7.75 to US$1. That is set to move to the peg rate of HK$7.80 when the spot rate for the US dollar trades consistently above HK$7.75. The changes are the latest steps intended to counter speculation against the territory's currency. Further measures to tighten regulations in the stock and futures market are expected this week. Joseph Yam, head of the Hong Kong Monetary Authority (HKMA), said the new measures demonstrated Hong Kong's commitment to its 15-year exchange rate mechanism. "The package of technical measures will strengthen and purify our currency board and achieve a higher degree of transparency," said Mr Yam. Reforms to the interbank market would reduce interest rate volatility and make it much more expensive for speculators to manipulate the territory's money markets. Under the changes, banks will be allowed to use holdings of Hong Kong Exchange Fund Bills, in effect government bonds, to acquire Hong Kong dollar funds. This increases available liquidity and reduces the risk of interest rates rising sharply when large amounts of Hong Kong dollars are sold, said Mr Yam. The convertibility of exchange fund bills also strengthens adherence to the currency board principle that all liabilities of the currency board should be transferable into US dollars. Hong Kong's financial authorities have been seeking to curb what they describe as a "double play" in which speculators push up local interest rates by selling Hong Kong dollars and benefit from short positions on the stock market. Although the new measures should make this more difficult, the administration said it reserved the right to continue its controversial practice of buying shares to counter the double play. A suspension of short-selling on some of the territory's shares, however, will be removed from today. Hong Kong's bankers welcomed the money market moves. "They should have a stabilising effect," said Mervyn Davies, executive director for north-east Asia at Standard Chartered Bank. But the plans included drawbacks and drew some criticism. Development of the territory's bond market is likely to be stunted by the requirements that new bond issues be backed by foreign exchange reserves and that only exchange fund bills will be accepted for conversion into US dollars. The new measures also give the HKMA discretion in setting the base rate, a new discount rate for clearing transactions in the interbank market. Mr Yam said this did not mean an increase in discretionary powers, since the HKMA set the discount rates already. Christine Loh, leader of the Citizens's party, said the new measures failed to remove concerns about intervention in the currency board mechanism. ft.com