HONG KONG — Nineteen ninety-seven brought a year in which Hong Kong's financial community saw red in a variety of guises.
First came the red hot "red chips," soaring stock shares in companies linked to China as Hong Kongers moved to cash in on the British colony's reversion to Chinese rule last July.
Any rumor that a China-backed entity had plans of buying into an existing Hong Kong company would send that firm's share price through the roof.
Investors weren't buying these shares on fundamentals - rather they believed that personal connections with mainland officials would lead to increased business in China and a profitable transfer of assets. (Most of these so-called "asset injections" never materialized.)
The change of sovereignty helped fuel a boom that shot the territory's blue-chip Hang Seng Index up almost 40 percent from April to August.
"China plays" performed even better. The index of China-affiliated companies rocketed almost 70 percent between June and August.
Perhaps the best example of red-chip fever was the listing of Beijing Enterprises, the investment arm of the Beijing municipal government. On the stock's first trading day, its price tripled.
Chinese state-owned firms listed in Hong Kong also fared beautifully. The Chinese Enterprise index rose 81 percent from January to August.
Bullish sentiment led a record number of companies to go public in the Hong Kong market this year - 82 companies raised $10.4 billion (US).
Then investors saw a different kind of red, the kind that describes sharp losses.
After the Hang Seng Index hit an all-time high of 16820 in August, the market reversed course. And soon all of the gains made during the euphoria surrounding the handover disappeared.
Since July, currency and stock markets in Southeast Asia had been crumbling as investors retreated from excess capacity, corruption and cronyism. But Hong Kong was considered immune.
On Oct. 23, the bottom fell out. Investors worried that regional problems would spread and that, locally, stock and property prices had risen too far, too fast. They sold out. The Hang Seng fell 10 percent.
Four days later, the city's de facto central bank raised overnight interest rates to 300 percent to ward off currency speculators, and the Hang Seng plummeted another 13.7 percent.
Government officials and private-sector analysts tried to convince investors that Hong Kong's fundamentals had not changed, but market players refused to listen. Sentiment soured. Interest rates remained high, and many investors stepped out of the market.
The Hang Seng is now down almost 23 percent for the year and about 40 percent off its 1997 high. The index of Chinese state enterprises, meanwhile, is down 43 percent since January, and the Red Chip Index has lost 40 percent of its value since it was introduced in June.