The chairman of the Hong Kong Futures Exchange (HKFE) yesterday backed down from earlier criticism of government intervention, saying the exchange 'wholeheartedly' supported the authorities. Geoffrey Yeh Meou-tsen said after a board meeting that HKFE's board of directors had decided to support government moves to defend the local stock, futures and currency markets. 'I would like to make it clear that the exchange is not in confrontation with the Government,' he said. 'The exchange wholeheartedly shares the common objective among the Government and the people of Hong Kong to stabilise financial markets. 'The exchange supports the Government's efforts and is loyal to the common will of the Government and the people of Hong Kong to assure monetary stability.' Yesterday's comments contrasted starkly with a statement he made earlier to the Legislative Council's financial affairs panel, in which he strongly criticised the Government's action. He said at the time: 'The proposed rule changes may lead the existing high turnover futures market to be turned into a market with no transactions at all. 'The drying up of the futures market would be to the disadvantage of Hong Kong as the business would go overseas.' He also warned the proposals would damage the local stock market. 'If there is very low turnover in Hang Seng Index futures, the futures market will lose its role of complementing the stock exchange,' he said. 'This will affect the stock exchange's ability to raise funds for local and mainland enterprises.' Mr Yeh yesterday said his 'reservations' should not be seen as confrontation. 'As the debate in the Legislative Council demonstrated, support for the Government and the overall well-being of Hong Kong demands that important policy initiatives be given thorough study before they are fully implemented,' he said. 'The exchange's recommendation for careful study therefore should not call into question our full loyalty to Hong Kong's best interests and support for the Government.' There had been widespread speculation in the market that the futures exchange had not co-operated fully with the Government in its bid to fend off speculators. The Government made six proposals to the HKFE in its 30-point package announced on Monday aimed at making it more difficult and more expensive for speculators to 'manipulate' the futures market. The most controversial of the proposed measures was that the exchange must disclose large open interests. This has worried many futures brokers. One director of the exchange has said his bank would leave the Hong Kong futures market if the rule were implemented.
