Calm markets help confound dire warnings

SConfident predictions about an outbreak of jitters in Hong Kong following Deng Xiaoping's death were confounded yesterday.

The mood of calm was reinforced by Tung Chee-hwa, the head of the first post-colonial government, announcing that all serving heads of Civil Service departments would be able to keep their jobs following the handover of power in July.

Mr Tung said this would "ensure a very large measure of continuity ... which will help maintain the stability of Hong Kong".

Most surprisingly, the normally volatile and notoriously jittery stock exchange, a reliable indicator of public opinion, shot up after a faltering start. Analysts had confidently predicted that the market would fall by 500 to 1,000 points. In the event, the leading Hang Seng Index rose 305 points, a gain of more than 2 per cent, as almost pounds 1bn changed hands in a day of hectic trading.

Stockbrokers said Deng's demise had been long expected and investors were waiting on the sidelines to pour money into shares once the paramount leader's fate had been sealed. There were also suggestions that China's supporters had joined the buying spree to convey an impression of confidence.

Investors' views seemed to be shared by most people in Hong Kong. "We've been expecting Deng to pass away for some time," Li Fu, a garage owner, said. "We are well prepared for this." Nevertheless, newspaper sales soared by 50 per cent yesterday and the television and radio stations gave blanket coverage to Deng's death. Most schools held special ceremonies and explained to pupils the implications of the Chinese leader's demise.

Deng's death even broke the ice between the Governor, Chris Patten, and Chinese officials in the territory. Mr Patten was admitted for the first time to the headquarters of Peking's de facto embassy in the colony to pay his respects and make the customary three bows before Deng's portrait.

Most local politicians stressed that the paramount leader's death would do nothing to change China's policy nor to create instability as the result of a power struggle in Peking.

However, Martin Lee, leader of the Democratic Party, speaking from London, said he feared there may be some changes for the worse as the new leadership opts for rigidly conservative policies because of their insecurity.

An indication of the degree to which Hong Kong remains in the minds of the Chinese leadership was provided by the appointment of Mr Tung and two Hong Kong tycoons, TK Ann and Henry Fok, to the 459-strong important funeral committee which will preside over arrangements for Deng's burial.

Mr Tung was in the Chinese capital when Deng died. He was seeking approval for his plans to reappoint all the principal officials serving the current administration. Only two new appointments were made to replace retiring officials.

The new attorney-general, now to be known as the secretary for justice, will be 57-year-old Elsie Leung, a well-known China-supporting solicitor and member of China's National People's Congress, the rubber-stamp parliament. Fears have been expressed that she might politicise the post.