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 brush ups in the foreign exchange market on topical anaesthetic anaesthetic agent currencies , specifically on East Asiatic 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 substantially traced and the resulting cause were similar although varying in the degree of saturation . A clear difference between Hong Kong and the another(prenominal) Asian countries touched by the 1997-1998 economic cri sis besides , was in the agency that Hong Kong handled the flagellum to its economyCompared to the other Asian countries , Hong Kong was fitted to continue its result when the monetary crisis first broke come on . This was , however swaned at a great cost . pecuniary authorities of the kingdom spent approximately US 1 billion in to suffer the gold . Although other countries withal undertook mass efforts to defend their currencies Hong Kong was the only one to be able to entertain its nail . This however , was only wretched-change-term . The economic attack continue and Hong Kong found itself needing to subjoin its inflation rates . former(a) countries such as the Philippines resorted to this strategy as well in . What do Hong Kong different in its strategy , however , was the governance 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 sha res , in various companies . This active di! sturbance 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 , employ 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 many instances wherein hedge funds have tried to exploit the local market . This is not to say , however , that Hong Kong has not human being up a valiant effort to prote ct and maintain the stability of its vulnerable market - owing to its small coat and low liquidity statusAccording to Kara Tan Bhala (1998 , the mechanism employed by hedge funds to try and make money bring 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, smart set it on our website: BestEssayCheap.com

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