And any sign that the peg might snap under market pressure could undermine the year-old administration of Hong Kong chief executive Tung Chee-hwa, they said.

"Whether the peg stands is critical to the authority and survival of the government. The fate of the peg is now the fate of the government," said political analyst Lau Siu-kai.

"Hong Kong people have been made to sacrifice and suffer so much because of the peg. If the peg goes, Hong Kong people will ask why the government went through the whole rigmarole," added the sociology professor from Hong Kong's Chinese University.

Hong Kong sent shockwaves around world markets this month when the government began buying stocks and futures, saying it wanted to protect the linked exchange rate and combat speculators trying to pressure the local dollar and drive down the stock market to profit from their short futures positions.

The Hong Kong dollar has been linked to the US dollar at HK$7.8 to US$1 since 1983 through a currency board system. Although the exchange rate does not fluctuate, heavy selling of Hong Kong dollars results in higher local interest rates, which helps slow economic activity.

The government intervention, which inadvertently hurt some ordinary Hong Kong investors, is the latest controversy to have enveloped this former British colony, which returned to Chinese rule in July 1997.

Unemployment, at a 15-year high, is set to rise further and analysts are predicting that the government will forecast a 5.5-per cent shrinkage in Hong Kong's economy this year when it releases a highly anticipated economic report on Friday.

In a more tangible sign that the economic downturn has bitten hard, almost 2,000 people queued up to get free handouts of rice on Monday in Kowloon and at least eight old people either fainted from the long wait or were injured in a scuffle that broke out at the site.

Legislators also are questioning the government's intervention in financial markets, and have asked them to explain the strategy to a meeting of the legislature's Financial Affairs Panel on September 7.

The meeting could lead to more public pressure on the government to be accountable in its use of public funds to battle market speculators, according to some legislators.

Sonny Lo, politics lecturer at the University of Hong Kong, said the intervention threw up ugly political questions which could haunt the territory in the months and even years ahead.

"If people around top officials and policy makers are seen benefitting in the markets during the time that the government intervenes, it could spark suspicions of insider trading and bring on the issue of a conflict of interest," Lo said.

Lo also said the buying up of stocks of major property developers and other blue-chip companies by the government this month would cause resentment in the territory.

"Property developers, for example, have seen their stock prices rise suddenly, recouping some of the losses they made earlier," Lo said. "If the government's action is seen as enriching the rich, it would cause unhappiness among the working class."