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The following is the full text of the statement by the Chief Executive, Mr Tung Chee Hwa, at the press briefing at the Central Government Offices this (Friday) afternoon:

Good Afternoon,

I know that the Financial Secretary has just given a media briefing on the special measures we have taken today in the stock and futures markets to counter speculative activities. Before implementing these measures, we have given really very careful and detailed consideration to their implications and their effects.

Over the past week there have been massive speculative activities in the Hong Kong dollar market and the stock and futures markets. We have been keeping a watchful eye on these activities, and have come to the firm conclusion that there has been an abundantly clear linkage between the currency play and the play in the stock and futures markets. They have brought along instability to the Hong Kong dollar market and artificially forced up the interest rate. Such destabilizing activities disrupt the course of our economic adjustment.

We must provide a healthy environment for our economy to undergo an effective and painful adjustment. To do so, we must have stable interest rate environment. The Financial Secretary has, therefore, today asked the Hong Kong Monetary Authority to use the Exchange Fund to take appropriate measures in the stock and futures markets to counter these speculative activities. These measures seek to increase the cost of speculation and hence discourage speculators from mounting similar attacks.

I have to point out that the Government has no intention to artificially support the stock market. The measures we have taken today directed specifically against the speculative activities under the present economic situation. We are fully aware that we are undergoing a very long adjustment period and adjustment will be painful but we are well prepared as a community to take such pain.

I must emphasize: the Government will, as before, adhere strictly to our long-standing policy of non-intervention in the stock and futures markets . We shall, however, take resolute action to reduce market distortion, if we find that there is an abundantly clear linkage between the speculative activities in the currency market, and those in the stock and futures markets. We have the responsibility to act swiftly to market play in order to provide a healthy environment for our economy to adjust.

We shall continue to keep a watchful eye on the markets and take timely and resolute action as and when it is necessary.

Thank you very much.

End/Friday, August 14, 1998

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