I HAVE BEEN through four market crashes as a stockbroker in Hong Kong and let me tell you this is not one. From its record peak of 18,301 in March 2000 the Hang Seng Index has now fallen 46 per cent. This represents a good deal of lost ground but it has happened over the space of more than two years. This is what we call a bear market. On Friday, October 16, 1987, the Hang Seng Index stood at 3,783. The following Monday it began to tumble, the market was then shut, and one week later it closed at 2,241, down 40.7 per cent. This is what we call a crash. There are still plenty of people who remember it but, for the benefit of those who do not, let me tell you a little of what it felt like from the perspective of one person caught in it. First of all, I only held on by the skin of my teeth to a new job that the week before had been absolutely secure. I was putting together a Hong Kong research department for Morgan Stanley at the time and had been given a personnel budget of 12 people. On the second day the market was shut I got a phone call from New York - you are down to three people. I had already hired four by then and the paperwork for that fourth, Peter Churchouse, had not yet gone through the system. I did not tell them. Peter was a hire that Morgan Stanley could not miss and they can thank me now that I just said, 'yes, no more than three' in response. What did it matter? I expected another phone call the next day telling us all to leave. On the streets below, the crowds were gaping white-eyed at the big market screens behind bank windows. No prices were moving. The market was shut. Still they just stood there: 'I've mortgaged the flat to buy the futures and I didn't tell the wife. Ohh . . . s***!' A friend of mine, a senior stockbroker from London had just done the same, stuck his entire bonus received only the week before into the futures, geared up to the maximum, and his home in London would be the price. I ran across him on the walkway over Connaught Road on the first day the market fell. 'What do you make of it, Jake?' 'Won't open much over 2,000, Simon.' He staggered, grey-faced. That sounds like a line from a novel but it is not. The market rumour had been that Li Ka-shing had finally arranged a Hongkong Land takeover and he had gone for broke - fortune to wipe-out in the space of a few hours rather than a few years. This is what makes a crash different from a bear market. The boss stayed awake for 48 consecutive hours, going right through two nights to make it clear to Hongkong Bank that we had a very big short position on the futures. If a certain fool idea to forgive all futures debts were adopted our entire offsetting long position in stocks would be dumped on the market at the opening bell and the index would in minutes be nearer 1,000 than 2,000. He kept his cool and won. The chairman of the stock exchange, Ronald Li, did not. Goaded by a reporter while already strained to the limit, he flew into a screaming rage seen on television round the world. In Swire house at the old Jockey bar (more commonly known as the Ashtray for its lack of ventilation) the usual brokers gathered and drank. They did not talk. They drank. The tabletop in the 'Gobsmacks' (aptly named that night) corner was hardly visible for the mugs of beer on it and so was the effect of that beer. Some things overcome alcohol. Real market crashes stun people. This is how you tell them apart from mere bear markets. In a bear market you still have two-way trade and you can still sell if you really want, however much it hurts. In a crash you cannot. Your doom is upon you instantly and you cannot get out.
