after sweeping southeast Asia, Soros turned his attention to hong kong. "Hong Kong's fundamentals were not as bad as Thailand's at that time, but there were also many bubbles in real estate and stock markets." From 1994 to 1997, the main prices in Hong Kong rose 12 times, and the resulting overheating of the economy led to a surge in wages and the stock market. In the first half of 1997, the Hang Seng Index rose from 12, points to more than 16,8 points. In July, the Hang Seng Index hit a record high 11 times in a month, and there was a craze of "all people share" in Hong Kong.

Jones believes that "Hong Kong's stock market, real estate companies and banks' stocks occupy a very important position. Once the bubbles in these two aspects burst, the stock market will be in danger at any time." In fact, the real estate bubble has also worsened the economic environment, increased the production and sales costs, and accumulated inflationary pressures. "Moreover, we believe that the cost of maintaining the linked exchange rate system is high, and we believe that the Hong Kong SAR Government can't survive."

Subsequently, hedge funds began a sustained attack on the Hong Kong dollar for more than ten months, and launched a three-dimensional attack on the Hong Kong dollar in conjunction with the foreign exchange market, the stock market and the futures market: first, a large number of Hong Kong dollars were sold short for US dollars. In January and June, 1998, when the Indonesian rupiah and the Japanese yen plummeted, hedge funds sold Hong Kong dollars separately, but under the resistance of the Hong Kong SAR government, the three attacks did not destroy the Hong Kong dollar.

Hong Kong's financial market was shocked in August

However, in August 1998, the situation changed, the atmosphere of speculation on Hong Kong dollars in the foreign exchange market accumulated, and various rumors spread everywhere, and market confidence was in jeopardy. On August 5th, the hedge fund launched its fourth impact on the Hong Kong dollar with the cooperation of the US stock market crash and the yen exchange rate crash.

This time, the Hong Kong government intervened in the market to make the hedge fund fail, but it also attracted criticism from the outside world that it undermined the "principle of free market". After many years, when talking about the experience that his well-designed battle plan was ruined by the intervention of the Hong Kong government, Jones defended his opponent. "It is inappropriate to accuse the Hong Kong SAR government of intervening in the market," he said. "When the market confidence was facing a total collapse, the government intervention boosted the market confidence, avoided a bigger crisis, and saved the market from the final collapse."

The battle that almost brought Hong Kong's financial market into collapse started on August 5th. Hedge funds continued to sell Hong Kong dollars in the foreign exchange market. The Hong Kong Monetary Authority fought back and used its foreign exchange reserves to take over HK$ 24 billion, while other banks took over HK$ 4.6 billion. At the same time, hedge funds also ignited a war in the stock market, and the Hang Seng Index opened all the way down on August 6th. In the following days, hedge funds took the opportunity to smash the stock market and fell to 66 points on August 13. Hedge funds took advantage of the market panic to make huge profits from the capital market. But at this stage, the seemingly exhausted Hong Kong government is planning a big counterattack.

The SAR Government strikes back

The $96 billion exchange fund and land fund are prepared to strike back at hedge funds, which are the property accumulated by all Hong Kong people through years of hard work and are regarded as the last barrier to keep Hong Kong's economy, so the SAR Government has to weigh them repeatedly. Half an hour before the opening of the stock market, Anthony Liang, then Chairman of the Hong Kong Securities Regulatory Commission, received a solemn notice from Donald Tsang, then Financial Secretary: In order to defend the linked exchange rate and crack down on international speculators, the Hong Kong Government decided to intervene in the stock and futures markets.

14th is Friday, and the market is extremely dull; But by noon, the market came out that "the government exchange fund will enter the market"; In the afternoon, when the Hang Seng Index fell to 6,5 points, the SAR government invested heavily in the market and absorbed big blue chips and futures through three brokers, including Bank of China, and the Hang Seng Index rose by 564 points throughout the day. At the same time, the HKMA sharply raised the interbank lending rate, making it impossible for hedge funds to replenish their blood with short-term financing. The timing of the Hong Kong Government's move on the 14th was just right, because the next three days were closed for the weekend and the anniversary of the victory of the Anti-Japanese War. When the market reopened, the US stock market had rebounded sharply, the yen exchange rate stabilized with the intervention of the Japanese government, and Asian stock markets began to rebound. Stimulated by many external favorable factors, the Hong Kong stock market rebounded strongly and the exchange rate of the Hong Kong dollar returned to stability.

"The decision of the Hong Kong SAR Government is very firm, and their timing is very good." Jones summed up this thrilling offensive and defensive war and said, "We made a mistake at that time.