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Group C3

Chen Li Hui
Christie Chew
Dinh Huang Phuong Khanh
Manu Mohan
Wilson Nugraha Citra

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m     ë × amine the effects of the intervention measures ë × tent of intervention comprises different combinations of intervention measures .

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Discourage Limit Long Term Borrowing Land Àbandon Àctive Plan to from LÀ  Sales Peg to Stock Restructure Causing Boosting USD HIBOR Purchase inancial Local Hike Policies Demand .

Àbandoning the peg would lead to Àllow true value of HK business to be similar results in 1980s and situations in reflected. HK during crisis. Discourage Limit Land Long Term Borrowing Sales Plan to Àbandon Àctive Stock from LÀ  Boosting Restructure Peg to USD Purchase Causing Local inancial HIBOR Hike Demand Policies =   Peg caused overvalued HKD in 1990s becoming incentive for investors to sell Lead to massive capital outflow from holdings in HK. . Thailand. Prevent the e istence of moral hazard due to the peg. Remove peg can prevent outflow of capital under this situation.

volatility in market due to volatile interbank rates and high prime rates. liquidity crisis to the market. . Discourage Limit Land Long Term Borrowing Sales Plan to Àbandon Àctive Stock from LÀ  Boosting Restructure Peg to USD Purchase Causing Local inancial HIBOR Hike Demand Policies =   High interest rates would limit amount Increase cost of borrowing causing of funding to speculators thus limiting businesses running into financial their gains. This temporary strategy to stop speculative attack does not prevent Àttract capital into HK. problem Prevent the e cessive borrowing from May lead to high bank rates making LÀ that can dry up the reserve causing the strategy costly.

. Discourage Limit Land Long Term Borrowing Sales Plan to Àbandon Àctive Stock from LÀ  Boosting Restructure Peg to USD Purchase Causing Local inancial HIBOR Hike Demand Policies =   May send out negative signal to the Increase domestic property demand to market that HK cannot afford to let the counter falling property market under overvalued property market fail thus high interest rates. hurting its free market reputation.

economies. Created conflict of interest with Reduce profit margin of short positions holdings in property developing undertaken by speculators in double confirm and being the sole supplier of play. Discourage Limit Land Long Term Borrowing Sales Plan to Àbandon Àctive Stock from LÀ  Boosting Restructure Peg to USD Purchase Causing Local inancial HIBOR Hike Demand Policies =   Tarnish HKǯs reputation as free market Stabilize stock market in HIS thus which can be its main competitive sustaining market confidence during advantage against other Àsian crisis. Stock purchase Ǯnationalizedǯ listed companies. land. Companies close to government may benefit from the intervention leading to possible crony capitalism. × hausted large amount of reserves without the certainty to ward off speculators .

Imlement lans to assist comanies to increase their real values. Discourage Limit Land Long Term Borrowing Sales Plan to Àbandon Àctive Stock from LÀ  Boosting Restructure Peg to USD Purchase Causing Local inancial HIBOR Hike Demand Policies =   HK government is still determined to Plug loopholes in the financial market maintain eg during crisis and not that can be e loited by the e loring the ossibility of other seculators.g. LÀ floating rates. e. Oening a Small and Medium ×nterrises Office to coordinate services and assistance for smaller businesses.g. measures such as Singaoreǯs managed e. .

Long Term Plan to Restructure inancial w  .

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Policies Àctive Stock Àctive Stock Purchase Purchase Limit Land Limit Land Sales Sales Boosting Boosting Local Local Demand Demand Discourage Discourage Discourage Borrowing Borrowing Borrowing Àbandon from LÀ  from LÀ  from LÀ  Peg to USD Causing Causing Causing HIBOR Hike HIBOR Hike HIBOR Hike °   °.

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Long Term Plan to Restructure º À       inancial        Policies         Àctive Stock Àctive Stock Purchase º       Purchase                  Limit Land Limit Land Sales Sales         Boosting Boosting       Local Local Demand Demand Discourage Discourage Discourage Borrowing Borrowing Borrowing Àbandon from LÀ  from LÀ  from LÀ  Peg to USD Causing Causing Causing HIBOR Hike HIBOR Hike HIBOR Hike °   °.

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Long Term Plan to º     Restructure inancial    Policies    º .

   Àctive Stock Àctive Stock     Purchase Purchase Limit Land Limit Land Sales Sales Boosting Boosting Local Local Demand Demand Discourage Discourage Discourage Borrowing Borrowing Borrowing Àbandon from LÀ  from LÀ  from LÀ  Peg to USD Causing Causing Causing HIBOR Hike HIBOR Hike HIBOR Hike °   °.

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Long Term Plan to º ï        Restructure inancial      Policies        Àctive Stock Àctive Stock º °       Purchase Purchase           Limit Land Limit Land º        Sales Sales Boosting Boosting Local Local Demand Demand Discourage Discourage Discourage Borrowing Borrowing Borrowing Àbandon from LÀ  from LÀ  from LÀ  Peg to USD Causing Causing Causing HIBOR Hike HIBOR Hike HIBOR Hike °   °.

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Long Term Plan to º ï     Restructure inancial  Policies º         º °    Àctive Stock Àctive Stock !     Purchase Purchase      Limit Land Limit Land Sales Sales Boosting Boosting Local Local Demand Demand Discourage Discourage Discourage Borrowing Borrowing Borrowing Àbandon from LÀ  from LÀ  from LÀ  Peg to USD Causing Causing Causing HIBOR Hike HIBOR Hike HIBOR Hike °   °.

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w  ë The measures that had undertaken by HK were aroriate e cet stock urchase ë Warded off seculative attacks temorarily ë Went against the free market rincile ë Created conflict of interest ë Used great amount of reserves ë Not certain whether attacks may return ë Àrtificially values in firms (bailouts) .

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Increase the confidence level of holding HKD . ë Guarantee a fi ed e change rate of HKD to USD by the HKMÀ ë Legally binding .Diminish the robability of anic currency substitution and HK market volatility Disadvantages: ë The issuance could be too burdensome if seculative attacks become too owerful .Provides insurance for holding HKD .

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    ë Monetary unification: eliminating HKD and relacing it with USD .Àchieve instant credibility .× terminate doubt about the ossibility of devaluation and revaluation Disadvantages: ë No control over its money suly ë orfeit its osition as a formal lender of last resort ë Give u a central bank ë Liquidity risks .

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     ë Restrict the international flow of caital to curb seculative outflows ë Temorarily banning short selling on financial stock .Boost investor confidence .×liminate the dilemma of HKǯs government intervention with the high interest rate Disadvantages: ë May lead to a net caital outflow and increased financial instability ë Caital controls could deteriorate the image of HK as a liberal economy .

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       ë Interest rate intervention ë reezing of land sales ë Stock market intervention .

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      Investor Dum HKD to buy USD Government absorb the HKD HKD in market Investor borrow more HKD from LÀ Government Intervention Interest rate Investor backed off Market stabilized .

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      Interest Rate Investor have short osition Government goes to stock market Stock market Investor lose money .