Tsang told a hurriedly-called press conference in Hong Kong that he had asked Hong Kong Monetary Authority (HKMA), Hong Kong special administrative region's de facto Central Bank, to launch counter attack on speculators earlier today.

"I have exercised my power under exchange fund ordinance and asked HKMA to draw upon resources of exchange fund to mount appropriate counter activities in stock and futures markets," Tsang was quoted as saying by the official Xinhua news agency from Hong Kong.

"I must make clear that we are not against shorting of Hang Seng index futures by hedge funds, or indeed by anybody," he said adding government will not tolerate attempts by speculators to manipulate the interest rates by "engineering extreme conditions" in the money market so that they could benefit from the short positionsthey have built up in Hang Seng index futures.

Financial secretary reiterated Hong Kong's long-standing policy of non-intervention in the stock and futures markets. "No intervention may take place unless a sufficiently clear linkage exists between the currency play and the stock and futures market play," he said.