Non-intervention pays

Asia's financial crisis has been exacerbated by the efforts of so many governments to save banks and well-connected finance houses from the consequences of their lending folly. Sad though it is to see Peregrine fail, Hong Kong's handling of this crisis is in welcome contrast to such behavior. As chairman Philip Tose admitted yesterday (Tuesday), the SAR government was right to refuse a bailout. Beijing has also defied predictions that it would rush to the rescue, so showing that commercial considerations sometimes count for more than connections in modern China.

By leaving it to the market to determine Peregrine's fate, Hong Kong has brought the crisis to a swift conclusion. Absorbing this shock will cause short-term pain. But it also puts the SAR in a strong position to bounce back far earlier than would otherwise have been the case, as shown by yesterday's (Tuesday's) rebound in share prices.

Serious questions remain about why such self-styled experts in Asian markets risked a third of their paid-up capital on a Jakarta taxi company at a time when Indonesia was facing financial difficulties. Mr. Tose's refusal to give any detail on this at yesterday's press conference does not help matters.

The community that has suffered the effects of this collapse has the right to expect answers, if only to save other local brokerages from being tarred with the same brush and shunned by investors. His failure to be more forthcoming is part of an unfortunate end to what was once a Hong Kong success story.

Peregrine has paid a price for its actions which will serve as a warning to others. Other Asian governments should take note of how a quick liquidation is far less painful than the prolonged crises which sprang from their initial failure to take similarly decisive inaction.

-- The South China Morning Post, Hong Kong