All of which leaves investors wondering — what on earth went wrong yesterday? As the dust settles, the main culprit in Thursday's Hong Kong sell-off has been identified as the raising of the market's interbank interest rates to a nose-bleedingly high 300 percent (when they returned to a more sensible 10 percent Friday, stocks also went back to normal).
The wacky 300 percent rate hike was part of the former British colony's defense of its currency — under attack from speculators and slipping from its U.S. dollar peg. "We are trying to beat off speculative attacks on the dollar," said the Beijing-appointed chief executive Tung Chee-hwa. "We will succeed in that."
A warning, then, that this could happen all over again. As Tsutomu Asaoka of Japan's Matsui Securities says: "It might be a short-lived Hong Kong flu, but it's too early to talk about the viability of the stock market."