Has the government of Hong Kong Special Administration Region restored the market stability after the intervention in the stock market

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Has the government of Hong Kong Special Administration Region restored the market stability after the intervention in the stock market

 

Author: Lam, Kwok-yuen
Title: Has the government of Hong Kong Special Administration Region restored the market stability after the intervention in the stock market
Degree: M.B.A.
Year: 2001
Subject: Hong Kong Polytechnic University -- Dissertations
Finance -- China -- Hong Kong
Hong Kong (China) -- Economic conditions -- 1997-
Department: Dept. of Management
Pages: 57, [18] leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1611614
URI: http://theses.lib.polyu.edu.hk/handle/200/1307
Abstract: The Asian financial crisis has caused devastating damages to the Asian countries' financial systems. Most Asian currencies had to be devalued and the stock markets were badly hit during the crisis. The Government of the Hong Kong Special Administrative Region managed to maintain the peg system by employing a high-interest-rate strategy. The stock market, however, could not withstand the huge selling pressure from speculators and hedge funds. Those short-term speculators pocketed handsome profits and left. One year after the Asian financial crisis, big speculators and hedge funds attacked Hong Kong dollar again so that they could make money in the stock market. The Hong Kong Government realized that if the speculators were not punished, they would keep coming back. On 14 August 1998, the government decided to intervene in the stock market by purchasing the Hang Seng Index constituent stocks. This paper examines the impact of such intervention to the stock market, and specifically analyses the volatility and liquidity of the stock market to assess the effectiveness of the intervention. While the intervention aimed to stabilize the market, the findings reveal that after the intervention, the volatility of the market intensified rather than reduced, and liquidity remained unchanged. The analysis results thus do not support the government's claim that intervention helped stabilize the stock market.

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