Heng Seng Index ---II

by

Chang Cheuk-Lap --Special HK correspondent

In these two days: Taiwan government(ROC) let their money market/ exchange rate to go free, trying to save the stock market. While HK government( at least yesterday) tries to protect the PACK (i.e.: $1 US = $7.78 HK) by raising the interest rate. The inter-bank overnight rate went up very high to 300% and stays at 50-40%, and the Mortgage rate at 10.5%. That is the reason Heng Seng index went down 1,211 in one day. CEO of HK,Tung, announced, while he was visiting London, that the high interest rate should be a short term policy. Analysts compared: "Taiwan vs. HK being targets of international speculator":

They have the same amount of reserve. Their economic environment are similar.Taiwan tried to increase interest rate to protect exchange rate without success, and then let the exchange rate float in the free market ( i.e.: down). But their stock market still goes down after the interest rate decreases, becoming a loser both ways.HK now tried to increase interest rate to protect the exchange rate (i.e.: not UNPACK) like the first round in Taiwan. Can HK be the exception ? Can HK avoid the disaster? Does HK have a choice?
The index closed at 11144.34 ( +718.04 , Oct.24,1997) . There is Hope!!!

The Dow Jones closed at 7715.41( -132.36, Oct.24,1997). There is a problem.