The Hong Kong Special Administrative Region Government has taken special measures in the stock and futures markets to counter speculative activities.

Hong Kong's Financial Secretary, Mr Donald Tsang, announced Friday evening (Hong Kong Time) that he had asked the Hong Kong Monetary Authority to draw upon the resources of the Exchange Fund to amount appropriate counter activities in the stock and futures markets.

The Financial Secretary said there had been substantial speculative selling of Hong Kong dollars by a few investment houses in the last few days, acting on behalf of hedge funds. "We believe, on this occasion, the speculators' aim has been to undermine the stability of the exchange value of the Hong Kong dollar and to produce sharply higher Hong Kong dollar interest rates as well as sharp falls in the stock market," he said. "This would enable them to benefit from their very substantial short positions which they had accumulated in the Hang Seng Index futures market."

"We do not tolerate attempts by speculators to manipulate our interest rates by engineering extreme conditions in the money market," Mr Tsang said. He said in order to achieve their objectives in undermining the Hong Kong dollar, speculators had deployed a whole host of improper measures, including spreading vicious rumours on the delinking of the Hong Kong dollar with the US dollar, devaluation of the Renminbi, as well as the instability of banks in Hong Kong.

The Financial Secretary emphasized that Hong Kong's long-standing policy of non-intervention in the stock and futures markets remain unchanged. "We only contemplate intervention in very exception circumstances when there is sufficient reason to believe that movements in the stock and futures markets are clearly and substantially caused by corresponding movements in interest rates engineered by speculative activities against the Hong Kong dollar."

"In other words, no intervention may take place unless a sufficiently clear linkage exists between the currency play and the stock and futures market play," the Financial Secretary said. "Under any other circumstance, the Government will of course continue to adhere strictly to non-intervention."