Author: Shen Hejun

With the return of Hong Kong to China in 1997, there has been a steady stream of international pessimism about Hong Kong. how can a "Pearl of the Orient", which has been infiltrated in Western society for a century, integrate with a socialist country that was still relatively poor at that time? Pessimism, doubt, ridicule. All kinds of voices followed. At this time, after defeating Thailand, Malaysia, Myanmar and Indonesia one after another, the American financial giants led by Soros began to focus on Hong Kong, the financial city at the cusp of the wave. thus set off a financial war that can make history.

1. The rise of Soros in the 1990s

The famous name of George Soros, the reader should be like thunder. Jewish origin, currency speculators and capital predators are worth more than the gross domestic product of the 42 member states of the United Nations.

In the 1990s, Soros launched a financial war around the world, attacking national currencies, and all the countries hated his guts. It is said that at that time, if a foreign exchange trader heard the news that the Bank of Japan had intervened in the market, everyone would laugh and what to do; if they heard "Soros in!", all the traders would jump up immediately, which shows Soros's prestige and strength at that time.

1992

Soros attacked the pound for the first time, defeating the Bank of England and winning the first drop of blood. His quantum fund is famous, and Soros netted $1 billion.

1994

The successful attack on the Mexican peso set the entire Mexican financial system back five years.

1997

In the best year of the Quantum Fund, when Southeast Asian countries were immersed in a capital feast, Soros captured Thailand in an instant. On the same day alone, the Thai baht tumbled more than 17% against the dollar, and foreign exchange and other financial markets were thrown into chaos. Soros then turned around to attack Indonesia, the Philippines, Myanmar, Malaysia and other countries with deep economic ties with Thailand, and also won many battles. It is speculated that Soros made a net profit of more than 10 billion US dollars in this war.

In 1998, after a wave of taking away the four Asian tigers, Soros, who was unprecedentedly powerful, set his last sights on the Asian financial center, Hong Kong, which had just returned to China, in an attempt to short the Hong Kong dollar. Subsequently, an unprecedented fierce financial defense war broke out between the international speculative group headed by Soros Quantum Fund and the SAR government headed by Tung Chee-hwa. This classic battle has also become the most exciting and magnificent page in the history of modern finance.

2. Three-dimensional sniper theory. Soros's secret skills.

Before describing the war, let's talk about Soros's three-dimensional sniper theory. Take the war in Thailand, for example, because Thailand has a fixed exchange rate, so Soros caught a loophole.

Soros's game is that if the Thai baht is exchanged for US dollars at 1:25, Soros first borrows 25 billion of the Thai baht from the Bank of Thailand as a mortgage, and then Soros changes the 25 billion into US $1 billion and holds it in his hand.

The next thing Soros has to do is to devalue the Thai baht. Then how to devalue the Thai baht with a fixed exchange rate? Is to keep borrowing Thai baht from the Bank of Thailand, then throwing it away, and finally buying US dollars. After repeating it several times, people suddenly panicked about how banks and markets were selling Thai baht, while the dollar was suddenly hot, so everyone went to buy dollars together. Because it is a fixed exchange rate, no matter how the Thai baht falls, it can always be exchanged for so many US dollars. All of a sudden, the Thai government has to announce that we have no more US dollars. So Thailand's money management buddies came out and said that it is better to float the exchange rate and let the Thai baht depreciate. Only when the Thai baht depreciates, the US dollar is enough to sell.

Then the Thai baht depreciated sharply, from 1:25 to 1:50. Now Soros changed his $500m into 50 billion baht and the 25 billion he owed to the bank, making a net profit of 25 billion baht, or $500m.

In the whole process of sniping the Thai baht, with the overwhelming rendering of public opinion and the precise timing of entry and exit, ordinary citizens and the Thai government were played with applause, fast, ferocious and ruthless.

3. Xiangzhuang sword dance is intended for Pei Gong

In fact, Hong Kong, as the financial center of Asia, was destined to become the place of decisive battle after Soros launched the financial war against Southeast Asia. If he can't beat Hong Kong, Soros can't get past it. Therefore, while "taking care of" the four Asian tigers, Soros has tested Hong Kong many times.

In mid-July 1997, January and May 1998, the Hong Kong dollar suffered a massive speculative sell-off three times. The exchange rate of the Hong Kong dollar was hit. The Hang Seng Index and the futures market index fell by more than 4000 points. The market was extremely panicked. Western public opinion jokes that Hong Kong has become a cash machine for international speculators.

At that time, the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, was jokingly called "any move" by the media, meaning that whenever financial speculators came over, the only move of the HKMA was to raise interest rates, increase the cost of financial speculation and maintain the linked exchange rate. However, in essence, this method is to drink poison to quench thirst, because it will deal too much a blow to the property market. It can be said that every time we resist a speculative attack, the Hong Kong Government will spit blood.

According to Soros and others' plan, to short the Hong Kong dollar in the foreign exchange market first, forcing the Hong Kong Monetary Authority to adopt the old pattern of pushing up interest rates, interest rates rise, the stock market is bound to fall, and Hang Seng Index futures will fall at the same time. Speculators can then sell short Hang Seng Index futures at lower prices in the futures market, and the foreign exchange market will both make a profit.

In August 1998, Soros, with wishful thinking, finally made a comeback with the strongest men and firepower after several temptations. Vowed to end Hong Kong in the first world war.

4. Tung Chee-hwa decided in half an hour that the Hong Kong Government would fight against the back of the water.

While Soros is planning the final war, the SAR government is also thinking hard about how to fight back.

Donald Tsang, the then Chief Secretary for Finance of the Hong Kong Special Administrative region Government, recalled that according to the analysis of Hong Kong Monetary Bureau officials, Hong Kong had "lost its momentum" after repeated attacks, and if the Hong Kong government did not take action, the Hang Seng Index would soon plummet to 4000 points. Bank loan interest rates will be at an all-time high, and Hong Kong is likely to be "out of breath" within five days.

Friends with certain knowledge of economics should know that Hong Kong adopts a linked exchange rate system, which is pegged to the US dollar at a rate of 7.8 per cent. At that time, there were few options for the Hong Kong Government: one is to impose exchange control, and the other is to announce the decoupling of the linked exchange rate between the Hong Kong dollar and the US dollar.

You might ask, why doesn't the government simply abandon the linked exchange rate? Donald Tsang answered this question in a letter many years later: "decoupling at this time will only cause Hong Kong people to lose all confidence in the Hong Kong dollar overnight. It will also lead to another sharp fall in the stock and property market, a surge in interest rates and a further deterioration of the economic environment, which may not be a blessing for the people of Hong Kong in the long run. "

So after a difficult choice, Donald Tsang made a historic decision: instead of letting the wealth of the people of Hong Kong fall into the hands of speculators, it would be better for the government to enter the market and use foreign exchange reserves to take a chance.

Donald Tsang and Joseph Yam then reported the idea to Tung Chee-hwa, the then chief executive of Hong Kong. The hesitant two people did not expect that it took Tung Chee-hwa only half an hour to approve and release it. Now that the matter is over, Donald Tsang knows very well that it is good to win if he fights with the hard-earned money of the people of Hong Kong. If he loses, not to mention taking the blame and resigning, it will be light for them to apologize with death. But before them, there is no other way to go. That night, Donald Tsang cried all night.

Sometimes, history just needs some people to make some difficult decisions. The final showdown between the two sides came as scheduled.

5. The grand gamble of the century kicks off against the winner of Hong Kong.

August fourteenthThe Hong Kong government suddenly stepped in and used the Exchange Fund and the Land Fund to enter the stock market and the Hang Seng Index futures market at the same time. As a result, the Hang Seng Index rebounded by more than 560 points, or 8%, to close at 7224 points on that day. Soros Legion was suddenly surprised that they did not expect that the Hong Kong Government, which has always touted the free market, would really enter the market to fight. However, Soros is an old quack after all, and he did not turn back and stabilize his position when he started work. Now that your Hong Kong government has been launched, only small fish and big fish have been taken with you.

Then until the 24th, the Hong Kong government and Soros's speculator group have been going back and forth, hand-to-hand combat. But the Hang Seng Index slowly curbed its previous frenzied decline and began to be in a state of shock.

August twenty _ sixthThere are still two days to go before the settlement date of HSI futures.

August 27th, one day before the settlement day.The Hong Kong stock market opened at 10:00 in the morning. At first, speculators' selling orders pounced on them like a sea of mountains. In the first 15 minutes, the turnover reached HK $1.9 billion; in the second 15 minutes, the turnover was HK $1 billion. In the 15 minutes before the close of the market, the battle entered a white-hot state, and the turnover was as high as HK $8.2 billion! The state was so tragic that all the traders on the floor were dumbfounded.

On this day, the Hong Kong government spent HK $20 billion to entrust 10 brokerage firms to chase and intercept 33 Hang Seng Index constituent stocks. The Hang Seng Index closed at 7922 points, up 88 points from the previous trading day, its highest level since November 4, 1997.

On the evening of the 27th, the final battle is coming.。That night, almost no one in Hong Kong fell asleep.

August 28, the settlement date of HSI futures.This is Soros's last chance to short the Hang Seng Index. Whether the large number of bearish futures he bought before can make money depends on this wave.

It should be noted that the settlement price of Hang Seng Index futures is the average of the Hang Seng Index quotation every five minutes of the day. Therefore, in order to raise the settlement price, it is necessary to ensure that the Hang Seng Index moves steadily. To achieve this goal, the Hong Kong Government must do its utmost to fight for every inch of land.

On this day, millions of Hong Kong people locked the channel, their eyes fixed on the fast-beating Hang Seng Index, and all of them were sweating. At this moment, many Hong Kong citizens are no longer concerned about whether their property has shrunk or not, and they really share the same fate with the city of Hong Kong.

At 10:00 in the morning, the decisive battle began. The Hong Kong government and the short selling group immediately launched a fierce battle on "HSBC Holdings PLC" and "HKT Trust and HKT". The speculators' selling was menacing and overwhelming, while the government forces came to block it, covering the water and the earth, and bought it all. Only 5 minutes after the opening of the market, the turnover was as high as 3 billion Hong Kong dollars!

Before the market closed at 12:00 at noon, the battle became fierce again, and a number of blue chip stocks such as "Cheung Kong" and "China Telecom" were frantically sold by speculators, and the Hong Kong government turned the tide. At the close of the afternoon, the turnover was HK $40.9 billion. When the market opened in the afternoon, the war situation became even more serious. The selling of speculators rolled in, and the Hong Kong Government used almost all its available foreign exchange reserves, ate it all and defended the whole line. On average, stocks worth 350 million yuan per minute changed hands.

At 04:00 in the afternoon, the Hang Seng Index finally stopped at 7829 o'clock!

After a thrilling four hours, the whole-day trading volume reached the highest ever recorded in the Hong Kong stock market-HK $79 billion! HSI futures finally settled at 7851 points. In a total of 10 trading days, the Hong Kong SAR government used the equivalent of HK $120 billion in foreign exchange reserves to push up the Hang Seng index by 1169 points.

The Financial Secretary of the Hong Kong Special Administrative region, Donald Tsang, immediately announced that the Hong Kong government had won the battle to crack down on international speculators and defend the Hong Kong stock market and the Hong Kong dollar.

The tide of Soros is over and the defeat is over. In this "decisive day" to defend Hong Kong, the trading volume of the Hong Kong stock market reached 79 billion Hong Kong dollars, about 10 times the normal trading volume.

Leaving aside the tragic situation of the day, the closing point of Hong Kong's Hang Seng Index at 7829 on the 28th is really a very insipid figure, which is even 93 points lower than that of the day before. however, the significance of this figure to Hong Kong's financial market is immeasurable. it has given the Hong Kong stock market a firm foothold, leaving international speculators not only without room for profit, but also because their contracts have expired. Will inevitably suffer huge losses.

Although international speculators are still struggling to move back to the war in September, the Hong Kong Monetary Authority issued new regulations on foreign exchange and securities trading and settlement on September 7, greatly restricting speculators' speculation. On the same day, the Hang Seng Index soared 588 points to 8000 points. The losses of international speculators further intensified and eventually had to retreat from Hong Kong.

The story that follows will be known to all. The Hong Kong market gradually recovers. In 1999, the Hang Seng Index returned to more than 10000 points. The Hong Kong Government withdrew from the stock market and made billions of US dollars.

Postscript:

In China Finance Online Co Ltd as a whole, there is a more unanimous view on the outcome of this financial war, that is, the Hong Kong government narrowly won. For Soros, it was the first time he had swallowed the fruits of the financial war. Although not necessarily a fatal blow in terms of economic interests, Soros began to realize that once the state power intervened fully, his tactics in the free market could not be completely won.

Up to now, many people are still debating whether the decision made by the Hong Kong Government at that time was correct and whether it violated the principles of the free market. My humble opinion is that the free market is of course important, but the market that has been maliciously attacked and manipulated is by no means a free market.

The Chinese Government has briefly stated that it is within the scope of the high degree of autonomy of the Hong Kong Special Administrative region that the Hong Kong Special Administrative region Government protects the financial freedom of financial enterprises and financial markets and manages and supervises them in accordance with the law. The Central people's Government has always supported the efforts made by the Hong Kong SAR Government to maintain the stability of Hong Kong's financial market and the linked exchange rate system.

The implication is that the eldest brother is here, don't think too much.

Compared with the serious devaluation of the Hong Kong dollar, the substantial decline in the wealth of the people and the wanton destruction of the financial market, what is it that the Hong Kong Government is burdened with some so-called "market abuse"?

losers are always in the wrong. The merits and demerits of right and wrong will be left to posterity.

This may be the consciousness of the first Hong Kong Government after its return to the motherland.