Prague, 22 October 1997 (RFE/RL) -- Share prices have crashed to their lowest point for the year on the Hong Kong stock exchange and the Hong Kong dollar has come under intense pressure in the latest sign that the Asian economic turmoil has not yet run its course.
At close of trading (today, Wednesday) share prices had dropped by more than 6 per cent, and market analysts say they see the trend as likely to continue.
The dramatic swing coincides with news that the Malaysian currency the ringgit, the Thai currency the baht and the Singapore dollar had slumped to new lows against the U.S. dollar. It was the sudden fall of the Thai currency earlier this year that sparked the currency crisis which has swept through East and South East Asia.
Reports circulated through the region that the Hong Kong Monetary Authority had intervened in the currency market to support the value of the Hong Kong dollar, which had come under pressure through heavy selling. A senior analyst with the Nikko finance house in Hong Kong told RFE/RL that there's no way of checking the accuracy of those rumors, because the Monetary Authority never discloses its interventions.
He noted the sharply-rising interest rates resulting from the currency selling, and said this could damage the economy if sustained.
He said the stock exchange's sudden downturn had been caused by fresh nervousness on the part of investors, who were worried that the region's continuing problems would have an impact on the Hong Kong market.
The Nikko analyst told RFE/RL that a speculative attack against the local currency is unlikely to make deep inroads into its value, because Hong Kong's fundamental economic indicators remain as strong as ever: the balance of payments is favorable, there's no foreign debt, and U.S. dollar currency reserves are high.
In blunt comments designed to steady the nerves of investors, Hong Kong's Finance Secretary Donald Tsang called on them not to be influenced by speculators. He said he has no intention of removing the exchange rate link between the Hong Kong dollar and the U.S. dollar. He said any rumor to that effect was spread by people who wanted to take advantage of a falling stock market.
He also expressed confidence that the government can defend the Hong Kong dollar against attacks. The official pegged rate is 7.8 Hong Kong dollars to one U.S. Dollar. Tsang said that regional currency fluctuations should not affect Hong Kong's growth prospects or exports.