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Monday, October 26, 1998 Published at 16:11 GMT

Business: The Economy

A tonic for the Hang Seng

The Hong Kong stock market recovered after the $15bn support

Hong Kong's administration has admitted that it spent $15.2bn (£9bn) propping up the stock market in August.

The administration now owns shares in all 33 companies that make up the benchmark Hang Seng index.

It owns more than 10% of three companies - property developers Cheung Kong Holdings and New World Development, and Swire Pacific, owners of Cathy Pacific.

A special company has been set up to oversee its investments. The company has promised to disclose any change in shareholdings of more than 1%.

Yang Ti-Liang, chairman of the new company, Exchange Fund Investment Ltd, said that the administration was in no hurry to sell its investments.

Intervention 'necessary'

The move to boost Hong Kong's share market came in the last two weeks of August when it was feared that speculators were trying to force a devaluation of the Hong Kong dollar, which is pegged to the US dollar.

The adminstration believed that hedge funds were selling the Hong Kong dollar, forcing the government to raise interest rates to defend its value, and simultaneously selling shares short on the stock market.

High interest rates hit share prices and forced the Hang Seng index to a record low.

Since the intervention, the market has recovered substantially, but critics say the move damaged Hong Kong's credibility as a free market area within China.

The operation has been a financial success, however.

Shares in the two property companies which the government bought in August are now up 95% and 51% respectively.

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