Representatives of the broking community believe Hong Kong's stock and futures markets will die a slow death if all the Government's proposed measures are fully implemented.
'In the short term, I think the objectives that they have [to wipe out short selling] are achievable,' ABN Amro strategist Eugene Galbraith said.
'It makes it very difficult for short sellers and arbitrageurs and that is the way the HKMA wants it.
'In the long term, these measures probably constrain the market, because you end up with a market that has less depth and liquidity.' Brokers said the clampdown on the futures and short-selling markets would shrink liquidity in the market by tying the hands of legitimate hedging, arbitrage and speculative activities.
Such activities were one of the few providers of liquidity before the Government began buying stocks on August 14.
Warburg Dillon Read's Asian banking research chief, Todd Martin, said: 'At the end of the day, whether you go long or short, the more liquidity you have on either way improves the actual pricing mechanism of assets.
'Prior to the HKMA's intervention, we were getting indications from some long-term funds that they were interested in taking some pretty hefty stakes . . . the benefit of having shorts is that the prices move more quickly to fundamental levels and you can end up with more liquidity for the stocks.' Smaller brokers were even more up in arms.