Monday, March 30, 2009

Creation of the Hang Seng Index; Finance in Hong Kong

Image of Hang Seng Bank Headquarters in Hong Kong. Click on Image to see a historical graph of the Hang Seng Index.Dear Gentle Reader,

Click on the title image to see a recent, historical graph of the Hang Seng Index--arguably the most important Asian stock market index.

The Hang Seng Index is produced by a subsidiary of the Hang Seng Bank, which is now a subsidiary of HSBC (the Hongkong Shanghai Banking Corporation). But, initially, it was produced by the Hang Seng Bank.

Sometimes it is best to go back to the start.

In the very beginning, the Hang Seng Bank was the Hang Seng Yinhao (Hang Seng Traditional Chinese Bank) which was founded in Hong Kong on 3 March, 1933 (3/3/33).

A yinhao was a native Chinese bank. The yinhao business model comprised: gold, silver, and/or currency trading/speculation, mortgage lending, and/or currency exchange.

In the 1930s there were around 300 yinhao in Hong Kong doing business with local Chinese people and firms. These were clients whom the international banks would not transact with.

The Chinese financial community was physically centered around the Chinese Gold and Silver Exchange Society on Mercer Street on Hong Kong Island. Deals, though, were cut in the restaurants and brothels of Shek Tong Tsui, at night.

Capitalisation was always an issue and the international banks would only lend to a yinhao if the international bank’s comprador personally guaranteed the full loan.

(Aside. The comprador was a Chinese, or a Eurasian, middleman at the international companies who went between cultures to craft financial deals between East and West... for a personal cut, of course.)

Compradors and their extended families wielded immense power, and their networks of friends and acquaintances controlled swathes of business in Hong Kong. Of course, the Japanese Occupation would reverse many familial fortunes.

Similarly, the yinhao movement was a closed group, and its members would wield great power in Hong Kong as local Chinese slowly pushed out the foreign merchants in Hong Kong.

The Hang Seng Yinhao was founded by: Ho Sin Hang, a gold trader; two Shanghainese traders, Lam Bing Yim and Sheng Tsun Lin; and the Guangzhou (Cantonese) trader Leung Chik Wai.

When the global depression came liquidity dried up and speculating and trading firms had very limited access to funds.

The depression winnowed the yinhao ranks; the few survivors (firms like Hang Seng, Wing Lung, and Wing On--all significant corporate players in Hong Kong and the world) became commercial banks.

Hang Seng Yinhao became the Hang Seng Bank, a Western commercial bank, in 1952.

Image of the Member of the Order of the British Empire (MBE) medal, front and obverse. This image, taken by User:ChrisO on 31 May 2005 was released by the creator to the public domain for any purpose and has been sourced through Wikimedia.
Now, let me move over to the other actor here, Mr. Kwan, MBE (Member, Order of the British Empire).

Mr. Kwan, MBE is now a Canadian but he was born in Hong Kong.

Mr. Kwan, MBE survived the tribulations of growing up through the Great Depression, he jointly assisted the USA and the Chinese military in the war against Japan in the Second World War, and, later, he joined the Hang Seng Bank in 1962.

In 1969, Mr. Kwan (no MBE, then) was tasked by Hang Seng’s Chairman Ho with creating a Hang Seng Index (“HSI”).

Chairman Ho wanted the HSI to be “the Dow Jones Industrial Average of Hong Kong”.

General Manager Q.W. Lee (of the Hang Seng Bank, at the time) explained that:
Chairman Ho believes we should constantly provide new products and services to our customers and the community,… …This will bring in more business and profits for the bank. If we create the index, Hang Seng’s name will be mentioned over and over again in newspapers, financial journals, and radio and television broadcasts. Can there be any better publicity for the bank?

What else could Mr. Kwan do?

He started working on the HSI.

Many Hong Kong companies wanted to be included on the HSI; they wanted the imprimatur of the Hang Seng Bank.

Speculation in the media, as to inclusion, referred to the proposed HSI as the Old Pal Index, especially as Chairman Ho had cultivated very close relationships with his commercial client base.

Chairman Ho, however, left Mr. Kwan free reign to select the basket of companies.

The sole, explicit constraint was that the HSI’s basket would hold 33 companies, because the Hang Seng Bank was founded in 1933.

The implicit constraint was that the HSI would be a quality instrument which investors would use and follow and that the bank's, and Chairman Ho's, good names would not be besmirched at any time.

The three primary criteria Mr. Kwan decided for the prospective 33 members of the HSI were that the:
  1. principal operational base of the company that issued the stock must be in Hong Kong;
  2. stock must satisfy a minimum average market value for the past twelve months; and
  3. stock must satisfy a minimum aggregate monthly turnover for the past twenty-four months
Mr. Kwan went to the Hong Kong Stock Exchange and researched the paper records, in the Exchange's archives, for all trades on a daily basis dating back to the exchange's birth in 1947.

Eventually Mr. Kwan determined that 31 July, 1964, would be the base day, valued at 100 for the Laspeyre-type HSI, and the HSI was launched on 24 November, 1969, with a valuation of 158.

The HSI was a hit from the beginning, and a hit with investors and the general public who loved the speculatory nature of the exchange.

The HSI was also a significant computational challenge.

The HSI was updated by hand, twice a day, until the advent of computerisation, in 1981, when the HSI was also updated by the minute.

Two share price copiers and two calculator operators would go to the blackboards at the Hong Kong Stock Exchange, twice a day after the close of the morning and afternoon sessions, to tabulate all the trades in the constituent 33 stocks and to compute the updated HSI.

They had very little time to read the hand-scrawled trades that had occurred, to compute the results, to double-check it, and to publish it in time for the next session of the exchange or the printing of the evening papers.

Errors were inevitable, until computerisation, but were not countenanced.

Image of sign put out by a gasoline dealer in Oregon, USA, explaining the flag policy during the fuel crisis in the winter of 1973-1974. As the sign says, the green flag means that anyone can buy gas, the yellow sign means only commercial vehicles can buy gas, and a red flag means that there is no gas at all for sale. This image is available from the Archival Research Catalog of the National Archives and Records Administration under the ARC Identifier 555518. This image was sourced through Wikimedia and is in the public domain in the United States because it is a work of the United States Federal Government under the terms of Title 17, Chapter 1, Section 105 of the US Code.Indexes show valuation and volatility in the marketplace.

In March, 1973, the HSI reached a then all-time high of 1770, but crashed to 437 in December, 1973, after the start of the global oil crisis, and reaching a record low of 150 in December, 1974, (The HSI was valued at 158 on opening day in 1969).

In 1978 China began economic reform and its open-door policy.

In July 1981, the HSI reached a new high, 1810.

Sino-British talks on the future of Hong Kong commenced in July, 1983, reached impasse; investors became nervous.

The Hong Kong/US dollar exchange rate plummeted from 4.80 HKD to 1 US Dollar to 9.60 HKD to 1 USD on September 24, 1983; in early October the HSI plummeted to 690.

Mr. Kwan, MBE retired from the Hang Seng Bank in 1984.

In a recent talk Mr. Kwan, MBE noted that:

As the rise and fall of the Hang Seng Index indicate, Hong Kong has had its share of economic ups and downs. But it has always rebounded at the first opportunity. Hong Kong is a small city, but it is a great city full of opportunities and a city of risk-takers. The fact that Hong Kong has had to live under the shadows of two giants – China and Britain - has been a blessing in disguise.

Hong Kong.

I might show you the buildings one day, or its restaurants, or its culture on another day... But, at the end of the day, everything is about money.

Money is what pumps in the arteries of this city of risk-takers.


Quotes are taken from both "The Dragon and the Crown: Hong Kong Memoirs" by Stanley S.K. Kwan with Nicole Kwan, published by the Hong Kong University Press as part of the Royal Asiatic Society Hong Kong Studies Series, and from personal notes and lectures of both Mr. Kwan, MBE, and Nicole Kwan.

Friday, March 27, 2009

Coming of age: rattlesnakes, judo, and bikes

Image of a rattlesnake warning sign located in a park managed by county of Los Angeles, department of parks and recreation (sic). Photographed and uploaded by user:Geographer. This work is licensed under the Creative Commons Attribution 2.5 License and was sourced from Wikimedia.Dear Gentle Reader,

Monday's post on green vipers in Asia took your humble scribe back to his own childhood.

Every year, almost, was a different city if not a different province for your humble scribe. 

Your humble scribe's Dad specialised in making offices work better without firing people. He made offices more efficient and helped people become more productive--skills that put him in demand. 

Despite a peripatetic life, grades one to three were rooted in Lethbridge, Alberta.

There were a lot of rattlesnakes around Lethbridge.

There also were a lot of Japanese Canadians who lived around Lethbridge, because many Japanese Canadians had been interned near here, during the Second World War, as their loyalty to Canada was considered suspect. 

Blood, it was pointed out by politicians at the time, was thicker than water. 

Some people see this as proof of racism in Canada. 

While it's true that some Polish Canadians, for example, were also interned during the Second World War (your humble scribe has visited their internment site in the Rocky Mountains), not all Polish Canadians were interned. But, over 22,000 Japanese Canadians were.

So, your humble scribe agrees that the internment of Japanese Canadians in World War Two was proof of endemic racism in Canada, at least in that era.

Among the many Japanese Canadians who stayed in Southern Alberta, after their internment was lifted, was Yoshio "Yosh" Senda who lives in Lethbridge.

Yoshio Senda has now been elevated to Membership in the Order of Canada, Canada's highest civilian order. 

Yosh's patriotism is no longer suspect.

The motto of the Order of Canada is desiderantes meliorem patriam (they desire a better country) because its few, elite members contributed substantially to Canada's betterment over the course of their lives.

Yoshio Senda is one of a handful of ninth dan (ninth degree black belts) in the world recognized by the Kodokan Judo Institute in Tokyo, Japan. He was the founder of organised Judo in Canada and coached numerous judokas and national teams.

Yosh Senda is the highest ranked judoka in Canada, ever, and the gentlest man imaginable.

Yosh (more properly Senda Sensei) was your humble scribe's first Sensei.

Yosh deserves his own post, but not today.

Yosh taught Judo out of the University of Lethbridge in Alberta, in Canada's dry prairies. 

In Lethbridge, if the weather was warm, I would cycle the few kilometers to the dojo (the judo practice hall) and then back home.

I remember going home on my beautiful bike, one particular summer evening. 

That bike was my first bike.

It had high handlebars with tassels that I half cut to make them spiky and tough, a banana seat, and it was metallic gold. 

CCM (Canada Cycle Manufacturing) made that bike.

That bike was the greatest bike of my life (to that point).

It gave me mobility, freedom, and the feel of the wind in my hair.

This post is not about that bike, either. 

At least not specifically.

This post is about riding my bike home, after Judo practice, and going through the prairies.

I am cycling up the long hill, out of the river canyon formed by the Oldman River. 

It's a steep climb.

When the local Blackfoot First Nation weren't slaughtering members of the Cree First Nation here, and crowing about that, calling the place Assini-etomochi ("where we slaughtered the Cree"), they might call it Aksaysim ("steep banks"). 

I have almost finished cycling up those steep banks.

The burn is sweet and deep in my calves, tired from Judo practice. 

Leaving the climb, I am now cycling onto the flats of the prairies.

The sun is going down but it's not at the horizon yet, that band way off in the distance where the flat sky meets the flat land. This is the place where dreams and nightmares both must come from, because there is nowhere else on the landscape for such great beasts to hide.

I know to keep a lookout for smaller beasts, snakes, because they become quite active right now. 

The rattlesnakes are warm from the sun, have gathered on the asphalt for its residual heat, and they get frisky because, while they are still warm, the asphalt is cooling down and it is time for them to leave.

I know all this. 

I've been told this. 

But, I've never seen a rattlesnake while cycling.

Until tonight.

Tonight I see one.

I see it right in front of me; I have been daydreaming and haven't been paying attention.

I squeal my CCM bike to a stop. 

Suddenly, the fact that I modified my golden CCM so that it would not fully brake and so that it would slide and skid to a halt is no longer quite so cool.

The rattlesnake is motionless on the ground, maybe a foot in front of me (Canada hasn't gone metric yet, but this would become 33 cm in a couple of years.)

At this distance I can see the texture of its overlapping scales.

I can see the detail of the yellows and browns and blacks and sand colours on the snake's scales.

I observe the patterns and my eyes are inexorably drawn to the snake's head.

I look up to its head and lock eyes with its eyes.

Frantically, my hind brain screams at me. 

"Don't look at its eyes!" 

"Don't be aggressive!"

"Stop looking at its eyes!"

Eventually, I listen to my hind brain as a second terror asserts itself.

I have been stopped on my bike one foot, or 33 cm, away from the snake.

I have been balancing on my bike, terrified to put a foot down.

Suddenly, I become aware that I have been balancing on tires alone.

I have never managed to do this before.

I can't do this.

With that certain knowledge, eyes locked on the neck of the rattlesnake, I start to fall.

Electric terror bisects my brain with a massive electrical surge.

My foot unconsciously lunges out and steadies me.  

Watching my alien foot, in slow motion, approach the ground and the snake, I wait for the bite.


Amazingly, with a warm ankle near its heat-sensitive pits, the rattlesnake does not strike.

Maybe the sudden jerk squeezed all the warm blood out of my leg and into my body?


I start praying for forgiveness for all my misdeeds and promising to change if I get out of this situation alive.

I will clean my room.

I will make my bed. Every morning.

I will stop calling Tara Yvette Gemer, at school, "the Barfing Mammal".

I will tell Dad that I flushed that apple down the toilet which caused him such grief. 


Dad had asked me, four hours after he started trying to fix the flooded toilet, if I knew how an apple had become lodged in the toilet's nether regions of plumbing, requiring complete removal of the toilet to extricate the apple. 

I suggested that the apple might have fallen from the tree outside, through the open window, with a gust of wind.

Dad stared at me, apparently considering this, as he looked me in my eyes. 

I almost thought that I heard him counting.

Dad pointed out that the apple, now recovered, had had one bite taken out of it.

I waited, silent, wondering if Dad would follow this observation with another question.

He did. 

He asked me if, given this new information, I had any other ideas as to how this apple might have arrived, deep inside the toilet.

I suggested that Mom might have done it. 

He asked me why she would have flushed an apple down the toilet after one bite.

I said, who knew? Mom does all sorts of crazy things.

I had a point, and a good one, too. 

And, besides, I wasn't stating anything as facts, merely as possibilities to be considered.

I guess Dad believed me because he just shook his head and kept recoiling the toilet snake... 

And, he didn't ask me any more questions about the apple. 

So, I left him to the task.)


(English language aside: 

A toilet snake is an exceptionally long, flexible, spiral spring that is threaded through a toilet and can extend into the pipes. It can push through, and unblock, many obstructions in toilets. It is, as Dad found, ineffective against whole apples.)


Thinking back on the apple, I kept staring at the rattlesnake stretched out on the cooling asphalt.

Then my calf started twitching.

Then my thigh started quivering.

Then my whole body started shaking.

The sun started to set over the horizon.

And I desperately had to pee--I never should have had so much water after practice.

And that snake just lay there, daring me to move my foot again.


Just then, a car came by.

In the early evening flash of its beams, my attention was distracted.

I saw the rest of the snake's body.

My eyes flicked away from the snake's head and down the length of its thick girth, strangely still and stretched out on the asphalt.

I saw the huge, flat, double groove where two side-by-side tractor-trailer tyres had flattened the snake's body.

This rattlesnake was dead--it had never even rattled.

This snake had been dead for hours. 

How did I know? The pavement was dry.

But, the pavement was not dry for long as I stiffly let my bike drop and released a pent up stream after the car had gone on in the distance.

That ragged stream was hot with fear, with shame at being afraid, and with shame at not seeing the tread marks and the signs of death. Shame at being fooled by my fears. 

My breath was ragged, as the hot liquid splashed onto the sandy soil and onto the asphalt. The fears of youth were not spent, but the fears of that day poured out.

Finally, I knew that I could go home.

I arrived home late.

I was in trouble with my Mom for dawdling and wasting time.

I was smart enough to not tell her about the snake; I wanted to keep on cycling.

I didn't tell Dad about the apple, either. 

It was neither an apple of life nor of knowledge, after all.

It was just an apple of deceit. 

I went to bed without any supper, but it was OK; I had swiped another apple when my Mom wasn't looking.

And I had faced down my first snake, albeit a dead one.

I might not have been a man yet, but I was not just a child anymore.

This was one of the passages from innocence to experience.

I was eight.


Wednesday, March 25, 2009

3WW (CXXX) entries

Image of young Buddhist monks walking to school at the start of the day in Phnom Penh, Cambodia.Dear Gentle Reader,

Hello again from Hong Kong.

It's another week, and time for another 3WW.

This week the words are earnest, layer, and reactive.

Tschuess, Chris


layers of sweet cake,
earnestly offered to all;
reactive results


for equi-layer.
reactive against class, state.
earnest fomenter.


Layers of meaning...
Is he Earnest? Is he so?
Reactive Marquess...


earnest (s)layers
of feudal classes crusade
reactive arms clash

and lastly, a naisaiku
(make up your own rhythm, you rhythmaster you)

bass layers laid down
earnest samples loop (repeat)
reactive culture
reactive culture
earnest samples loop (repeat)
bass layers laid down


I know there are more than a few Indian national wordsmiths who play 3WW.

I may well be in India in a week's time.


Likely in Mumbai (Bombay), Pune (Poona), Nagpur, and maybe New Delhi and Agra.

Does anybody want to meet up in Mumbai or Pune or Delhi or Agra? Otherwise I will just be roaming the streets, looking for interesting slices of life, and observing how my favourite sub-continent has changed in the last decade.

A note for Wednesday (read the web, not the mail)

Image of a partially submerged, traditional fish-trap in a moat in Cambodia.Dear Gentle Reader,

Sometimes things are only in one's head.

Like what? 

When I wrote of Hong Kong fashion last week, it was partially a tribute to the otherworldly fashions of Camelopardalis' giraffes, found here or here.

And yet I completely forgot to mention them.

All of you who subscribe by email ought to know that there are usually significant differences between the email that is sent out (when the balloon flies up and the posting first goes out) compared to what floats on the website a half hour or so later.


Because of the disconnect between what your humble scribe is sure is (or needs to be) on the screen, and what really is (or needs to be) on the screen.

It is usually better to visit the real site and use the email as a reminder, because the finished posting is almost always different from the earlier email you will have received.

Image of a field of four-leaf clovers at the side of a seasonal lake in Cambodia near Siem Reap.
Sometimes you get lucky and find some four-leaf clovers, as I did here in Cambodia, when you open the email.

But, my skill, if any, lies in re-examining what I have written and making amendments within the time I allow myself.

I allow the momentum of the instant edit to sweep away the detritus that I thought was fine before I published. 

The panic of realizing that now is too late, that the first few visitors are already staring in bewilderment at what I have posted; that is when the scales fall away from my eyes and I truly read my posts. I then swoop onto my words as the hawk swoops onto his prey, hoping to break the spine of rebellion and render the text more fit for consumption.

So, by all means, receive the email. 

But, please, go to the website to read.