Should Hong Kong be using ‘war chest’ firepower for Northern Metropolis?

In the summer of 1998, the usually placid air at the Hong Kong Monetary Authority’s headquarters in Citibank Tower suddenly evaporated as regional currencies collapsed like dominoes.Rapacious speculators had shorted currencies such as the Thai baht, the Indonesian rupiah and the Korean won and had profited handsomely. The contagion looked like it would also bring the Hong Kong dollar to its knees. As storytellers from the era have recalled, that sweltering month of August, the wolves were at the gates.International hedge funds had launched a lethal double play – simultaneously shorting the Hang Seng Index and dumping the Hong Kong dollar. They were betting that the de facto Central bank’s rigid rules would force interest rates to stay so high that the stock market would collapse, handing them a billion-dollar payday.For two weeks, the city’s financial leadership sat cloistered in a high-stakes war room. The decision they faced was an ideological heresy: should a laissez-faire government intervene directly in the stock market?With absolute secrecy and the firepower of the Exchange Fund, they orchestrated a defensive manoeuvre. Three of the largest stockbrokers were invited to breakfast at the China Club in Central and sworn to secrecy as they were tasked to buy on the authority’s behalf.The HKMA unleashed its spending power over 10 days. Finally, on a single Friday, it absorbed an avalanche of sell orders, spending HK$79 billion (US$10.1 billion) in five hours to break the speculators’ backs.That “August war” cost HK$118 billion in total, but it bought something more valuable – a reputation for the Exchange Fund as the city’s ultimate, untouchable “war chest”.