Advertisement
YOU ARE HERE: LAT HomeCollections

Monday Business

Hong Kong Should Sell Stock Holdings, Economist Says

November 09, 1998|From The Associated Press

The Hong Kong government should sell the massive shareholdings it acquired during its controversial market foray last August or risk a loss of confidence in the territory's currency, the currency board's architect told legislators.

John Greenwood, president of Invesco Asia Ltd. and one of the key economists who drew up Hong Kong currency's fixed exchange rate system, said it was "neither appropriate nor desirable" for the government to hold so many shares of privately held companies.

"It is highly desirable that the government should distance itself from the day-to-day management of the portfolio," Greenwood told the Legislature's financial panel Saturday.

This last summer, the Hong Kong government spent $4.4 billion in foreign exchange reserves, scooping up shares and futures contracts in an effort to drive up stock prices to levels at which speculators--who bet the market would fall--would be stuck with huge losses.

Hong Kong officials have argued that investors were selling the Hong Kong dollar in an attempt to force monetary authorities to raise interest rates to maintain a fixed exchange rate to the U.S. dollar. At the same time, speculators had taken short positions in the stock market, which they expected to fall as interest rates rose.

Greenwood said the intervention was a departure from the usually sound management of Hong Kong's currency board. Without divesting of the shares, the government could face conflicts of interest that would inevitably damage Hong Kong's 15-year-old currency peg.

Advertisement
Los Angeles Times Articles
|
|
|