TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 109

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Annex

Reports which were negative to Hong Kong's image included open speculation that the futures market was not closed for the reason given, i.e. to clear a backlog, but because of a crisis in the market; brokers and analysts openly challenging Hong Kong's claim to being an important financial centre (Derek Davies of FEER in a BBC radio interview described the market closure as a "Mickey Mouse act of cowardice"); the lack of adequate market structures and supervision and reports that Mr Ronald Li ran the exchange as a personal fiefdom.

On the positive side was the government's swift action to launch a rescue fund to save the futures market, which was seen as vital for the maintenance of Hong Kong's financial - markets; reports that the Bank of China came to the aid of Hong Kong during the crisis. which was seen as a confidence booster, statements made by the Financial Secretary when he announced the lifeboat package, the appointment of Mr Wilfred Newton and Philip Thorpe to the futures exchange; and the appointment of Mr Robert Fell.

The latter's appointment attracted considerable publicity in the media here and was seen as a step in the right direction. Editorially the Financial Times commented "...all that can be said so far is that the government has acted sensibly in putting together a force of professionals with experience of Hong Kong, of corporate rescues and of futures market to attack the problem". Mr Fell's appointment as senior chief executive of the stock exchange was reported very positively in the media. Many reports welcomed news that he was to be given extensive powers to introduce reforms on the exchange and to introduce to it a professional management that would bring it into line with other exchanges world-wide.

China's move to link up with the Hong Kong Government and banks to boost the rescue fund was seen in the media here as an unprecedented step that underscored the Chinese deepening commitment to the territory as the 1997 transfer of sovereignty approached. The media noted that when the new rescue package was announced--with the Bank of China's involvement--the market started to rise.

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