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SCMP Reporter

TWO senior government officials yesterday sought to calm nerves ahead of a critical week for Hong Kong's stock and currency markets.

 The tenor for the reassuring comments by the Financial Secretary, Sir Donald Tsang Yam-kuen, and the Chief Secretary for Administration, Anson Chan Fang On-sang, was set by events on Friday which pose a fresh threat to fragile markets.

  Trading will open tomorrow with the fate of Peregrine Investments Holdings hanging in the balance and concern about the future of local interest rates after Friday's increases.

 The slide in Wall Street and the sharp decline in Hong Kong stocks traded in London after Friday's local close will add to the uncertainty.

 The Hong Kong stock market fell 17 per cent after one of the worst series of trading sessions since the regional crisis hit the SAR in late October.

 Sir Donald, during a 90-minute press briefing, expressed confidence in the ability of Hong Kong to 'take the blows' and repeated his faith in the local currency's link to the US dollar.

 Friday's rise in the mortgage rate would make the people of Hong Kong 'feel the pinch'. However, he said this was the price that had to be paid in the short term to help ensure stability.

 He saw no immediate relief to the difficult conditions. 'There are bumps ahead but, by sound financial controls, we will be able to cope. It will be a tough few weeks ahead.'  He acknowledged that the past six months had taken a toll on the economy but claimed Hong Kong would emerge strong.

 'We are not as strong as we were a year ago but we are still pretty strong and the strongest in Asia,' he said.

  He repeated his assurance that during his term as Financial Secretary there would be no alteration to the present linkage to the US currency.

 'The term 'controlled devaluation' has lost its credibility. Once you loosen a currency it is gone forever, like virginity,' he said.

 Mrs Chan also offered a strong defence of the peg. 'I realise . . . this is a difficult time for many. But what we need now is steady nerves, a cool head and prudence,' she said.

 'The linked exchange rate has served Hong Kong extremely well. There is no intention on our part to review this.'  Sir Donald conceded that the crisis in regional economies had continued longer than he expected.

 However, he added he was determined not to 'allow these guys [international currency speculators] to make money out of the misery of our people'.

 He welcomed China's response to the crisis and said he had received assurances that the mainland would not devalue its currency.

 A mainland devaluation could deepen the crisis and senior Chinese officials have recently gone out of their way to dismiss such a move.

 He said China was well positioned to make economic adjustments to overcome any loss in competitiveness caused by the massive slide in Asian currencies.



Calm urged as critical week looms