Hong Kong Timeline
June 4 -- Concern about rising interest rates in the United States drives shares of Hong Kong companies lower. As seven out of ten companies in Hong Kong have substantial property holdings, rising interest rates cause them consternation as they reduce prices and make transactions more difficult to complete.
June 13 -- Beijing approves China Everbright-IHD Pacific Ltd.'s bid to acquire one-fifth of a mainland Chinese bank. This decision snapped Hong Kong shares out of a five-day rut, ending the Hang Seng's biggest decline since March of 1996.
June 19 -- Property-related companies rallied as investors speculated that the incoming government's housing policy would not hurt property prices. Optimism on property prices continues to drive the Hang Seng.
June 20 -- Rumors that Chinese interests will purchase a stake in Hang Seng Bank Ltd. drove the Hang Seng up 647.87 to a record high, giving the index its largest percentage gain since February 6, 1995 and its biggest point gain ever.
August 19 -- Hong Kong bond yields hit their highest levels in five years due to speculation that the territory would give up its ties to the U.S. dollar. As the rest of Asia's currencies plummet due to devaluation, investors start to worry that a strong Hong Kong dollar would become burdensome to the territory. The Hang Seng fell 619.62 to 15,477.26, led by interest-sensitive property shares.
August 21 -- Interest rates peak above 9.0%, up from less than 6.0% a month ago, causing property-related shares to tumble amidst concerns that rising rates will put a damper on corporate profit growth. A U.S.-based pop in interest rates fueled this move as many speculated that any increase in U.S. rates would drive dollar-linked Hong Kong rates higher as well.
August 28 -- Weakening currencies and tightening credit throughout Asia spurred fears of slowing economic growth throughout the region, pushing the Hang Seng to a two-month low. Rising interest rates were particularly devastating to property-related shares.
August 29 -- The Hang Seng closed it worst week since March of 1994 with an 8.4% decline as Asian investors unloaded stocks in Asia's second-biggest market. A rush to dollar denominated assets caused by the decaying currencies of neighboring economies played fast and loose with Hong Kong rates and sent Hong Kong shares spiraling lower.
September 3 -- The Hang Seng posts its biggest one-day gain ever, rising more than 900 points. Neighboring countries continue to see their currencies collapse. Malaysian Prime Minister Mahathir Mohamad will lift trading curbs on the ringgit the next day, which causes rallies in the beleaguered ringgit, Thai baht, Philippine peso, and Indonesian rupiah.
September 9 -- The Hang Seng capped a three-day rally as investors grew jubilant over the prospects for the 15th Communist party congress. Investors are specifically looking for the congress to give its blessing to reorganizing state-run enterprises, which tend to push shares in these companies higher.
October 20 -- Rising interest rates push the Hang Seng below 13,000 as banking and property-related shares are crushed underfoot. Morgan Stanley's Barton Biggs reduces Hong Kong weighting to 0.0% in Morgan Stanley's model portfolio. Asian money managers converting their stock into cash cause local interest rates to rise. Overnight lending rates will approach 30%.
October 23 -- The Hang Seng continues to endure its worst beating since the 1989 Tianamen massacre. The index falls 10.4% and pushes losses for the week up to a staggering 23.3%. Mark Mobius of the Franklin-Templeton funds predicts that the index will fall another 20% before it is through. Overnight lending rates the previous night went as high as 300% with interbank loans topping out at 47.5%. Overnight rates this evening will be 70%. Needless to say, this does no good for real estate and financial companies dependent on a strong property market.
October 24 -- Hong Kong Chief Executive Tung Chee-hwa promises to keep the Hong Kong dollar "pegged" to the U.S. dollar despite the instability.
October 28 -- Tung Chee-hwa informs investors that the Exchange will not close like it did in 1987, when it was the only stock exchange to cower and hide after the October crash.
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