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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: AlanH who wrote (26794)	9/7/1998 10:44:00 PM
From: flickerful	Respond to of 94695

from the south china morning post on HK.... TuesdayÿÿSeptember 8ÿÿ1998 Raft of new rules aims to shore up peg RAY BASHFORD Business Editor The Government yesterday marshalled extra forces behind its defence of the dollar peg with new measures to combat ''market manipulation''. The 30-point package tightens government control of the securities and futures markets. It gives it increased powers over illegal trading, including making more activities criminal offences. Financial Secretary Donald Tsang Yam-kuen said the action should reduce the need for further direct intervention in the futures and securities markets, although he declined to rule it out. He said the Government was ''in the middle of a battle'' with speculators, but remained ''fully committed to free-market policies''. The package increased local and international opposition to the government intervention, which critics see as a surrender of its commitment to free-market principles. The measures, the second and most sweeping set introduced to defend the peg, give the Government greater power to force financial institutions to comply with regulations. In one of the most controversial moves, the Government will study whether to grant the Chief Executive the power to ''give direction to the exchanges and clearing houses to ensure that the Government can react quickly whenever public interests are at threat''. This represents a potential erosion in the authority of the Securities and Futures Commission. The commission now acts as an intermediary between the Chief Executive and the exchanges and clearing houses. The harshest measures were aimed at short selling, where speculators gamble on the market falling by selling shares in the hope of buying them back at a lower price. ''The measures were not undertaken lightly,'' Mr Tsang said. ''Each carries its own risk and its own cost.'' The Government will study criminalising unreported short selling. It also will act to increase penalties for illegal short selling from a maximum fine of $10,000 and six months' jail to a $100,000 fine and two years' jail. It also said it would establish an independent body to manage the estimated $100 billion portfolio it has amassed since August 14. The stock market moved sharply higher yesterday, partly in reaction to measures to improve liquidity in the banking system and bolster the peg which were announced on Saturday. The Hang Seng Index closed 588.29 points, or 7.85 per cent higher, at 8,076.76 after peaking at 8,189. Mr Tsang expressed satisfaction with the market's reply, while giving his most poised public performance since the crisis broke. A general feature of yesterday's plan is more government powers to supervise and intervene where it believes irregularities are taking place. As part of this broad thrust, it is establishing an inter-agency committee with representatives from the five leading financial authorities under the Financial Services Bureau. The Financial Secretary said the Government wanted to dispose of the positions it had built up in the securities market as soon as possible. This would be done through the independent body which the Government was creating to ensure that all transactions were undertaken at ''arm's-length,