CHAPTER I
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OVERVIEW
Background
1.1.
On 19 October 1987, following a week of set-backs
on Wall Street, the world's securities markets braced
themselves for a storm. As the markets opened, news of sharp declines spread around the world, culminating in a
further 22.6% drop on Wall Street, the sharpest decline it
had ever experienced, surpassing even the worst traumas of
the 1929 crash. Other markets followed suit, with London,
Tokyo, Australia, Singapore and the other Asian markets showing record declines over the next few days.
1.2.
Hong Kong was not immune, falling 11.1% on 19 October alone, but its experience of the October crash was nevertheless unique (1): on 20 October, the stock market
closed for the rest
market did the same.
a
$2
of the week; the stock index futures
Massive defaults by futures brokers
followed and
billion (2) rescue package was assembled by the Government in conjunction with major brokers and banks to save the Hong Kong Futures Guarantee Corporation and the futures market from bankruptcy and to protect the rest of Hong Kong's financial system. When the
Exchanges re-opened on 26 October, the market plunged a
(1) The events of October 1987 are discussed in detail in
Appendix 1.
(2)
US$256 million. When dollars are used in this report, they are,
unless otherwise stated, Hong Kong dollars. At the time of drafting, rates of exchange were HK$7.8 = US$1; and HK$14.5 = UK£1. These rates have been used, wherever appropriate, in this report.
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