October's victories cut back room for error

It would be disingenuous to call them smug, but Hong Kong's financial bosses definitely had the look of cats who had got the cream. Six months after staring into the economic abyss, a world-weary and fire-tested government A-team told how they won the war.

Academic brain-storming on new mechanisms to defend the peg were rejected as worthy yet fatuous trifles. If history is written by the victors, Financial Secretary Donald Tsang Yam-kuen and senior aides presented a redoubtable account of the October 23 currency attack.

Failings exposed by last year's stock market boom and subsequent bust saw thoroughly sensible regulatory changes announced.

More transparency in the warrant market, clear disclosure of share buy-backs and listed firms' exposure to single countries or creditors stand out. More powers for the Securities and Futures Commission to enforce the listing rules are long overdue. In a continuing process to make Hong Kong a top-tier market, they rank as evolutionary reforms quite rightly learned through trial and error.

And yet that was not the purpose of the Financial Services Branch report, conceived in the aftermath of a near catastrophe. Back in October, the financial system arguably courted outright collapse. Boiled down, the government yesterday said the system worked, high interest rates were a shame but the price of stability, and nothing need change.

Given the absence of banking failures and orderly recovery in share prices, it would seem to have a point. Nobel Laureate Merton Miller might have promised a free lunch from clever insurance schemes, but higher interest rates and lower asset prices surely mean competitiveness is being won back.