A Case Study Of Hong Kong’s Financial Crisis In 1997-1998

A Case Study of Hong Kong s Financial Crisis in 1997-19981 )The Asiatic Financial Crisis was a result of massive speculative bombardments in the foreign exchange market on local anesthetic anaesthetic agent currencies , specifically on East Asian currencies . The problem started with the devaluation of the Siamese baht in 1997 which then spread to speculative attacks on opposite Asian currencies . This resulted in economic crises in Malaysia Indonesia , Philippines , Korea , capital of Singapore , china , and Hong Kong (Kawai 1998 ) The reasons for the spread of economic decline in the countries were good traced and the resulting cause were similar although varying in the degree of garishness . A clear difference between Hong Kong and the some other Asian countries touched by the 1997-1998 economic crisis heretofore , was in the modal value that Hong Kong handled the flagellum to its economyCompared to the other Asian countries , Hong Kong was fit to continue its take after when the monetary crisis first broke come on . This was , however handleed at a great cost . monetary authorities of the kingdom spent approximately US 1 billion in to suffer the capital . Although other countries similarly undertook mass efforts to defend their currencies Hong Kong was the only one to be able to agree its nail . This however , was only utterly-change-term . The economic attack continue and Hong Kong found itself needing to ontogenesis its inflation rates . otherwise countries such as the Philippines resorted to this strategy as well in . What do Hong Kong different in its strategy , however , was the regime s purpose reversal from being a passive governor to an restless market participant . The government ended up use approximately US 15 billion in buying shares , blue-chip shares , in v arious companies . This active interference! insure the relative stability of the Hong Kong market as compared to the other Asian markets during that time2 )Hedge funds , by their very nature , lend oneself opportunistic trading strategies on a leveraged basis .

For a market with a limited liquidity such as that of Hong Kong s , a small gamble on the part of a large hedge fund could result in a large transaction that could have large-scale effects on the said market . For Hong Kong s economy , there have been numerous instances wherein hedge funds have tried to exploit the local market . This is not to say , however , that Hong Kong has not flake up a valiant effort to protect and maintain the stability of its vulnerable market - owing to its small size of it and low liquidity statusAccording to Kara Tan Bhala (1998 , the mechanism employed by hedge funds to try and make money come out of Hong Kong involves two steps Initially , Hong Kong equities and stock-index futures are sold short by speculators . Next , the speculators resort to short-selling the Hong Kong dollar . Short-selling the dollar go forth force the Hong Kong Monetary Association to try to maintain the peg of the Hong Kong dollar to the US dollar . This would mean resorting to an increase in interest rates and to buying the local currency . divide prices on...If you want to get a full essay, cabaret it on our website: OrderCustomPaper.com

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