"I agree with the government's purpose, but not the method," said Marshall Mays, chief strategist at Nikko Securities in Hong Kong.

Circuit breakers, adopted in the United States following the October 1987 crash, halt trade for a period of minutes or hours when volatility reaches a certain level.

The Hong Kong government intervened in the territory's share market on Friday last week, spending billions of Hong Kong dollars buying stocks a day after the Hang Seng index hit a five-year low.

Mays said circuit breakers can thwart proprietary traders moving in and out of the market to exploit momentary changes in prices, while protecting the interests of "real" traders interested in buying stocks for more fundamental reasons, Mays said.

"What it does is create periods of illiquidity and that creates a lot of risk for proprietary traders," he said.

Proprietary traders using money held in their banks' own accounts rather than working on behalf of clients were the main players in the Hong Kong "double play," Mays said.

So-called "prop" traders have routinely sold Hong Kong dollars in order to push up interest rates and reap massive rewards on short positions placed on the stock market.

Some have described the trade as an ATM (automated teller machine) for the large US and European investment banks.

Analysts said circuit breakers would be effective in Hong Kong without raising a fuss about the government's principles.

Intervention suggested asset price declines were politically unacceptable to the current government, thereby raising questions about its commitment to the Hong Kong dollar currency link to the US dollar.

The government on Thursday defended the intervention as a method to fight speculators manipulating Hong Kong's markets and denied it was an attempt to set a market level.

"So our effort is a very narrow effort, is a very defensive effort targeted specifically at this particular action and no more than that," chief executive Tung Chee-hwa told a business audience on Thursday.

If the Hong Kong government was attempting to stagger future declines in the stock market, intervention was a good idea, said Andrew Ballingal, strategist at Schroders Asia.

"If it's merely to prevent a potential vicious spiral down, to introduce two-way risk and put a counter-party where there was no counter-party, then that's all perfectly healthy," he said. "But if they are actually trying to set the market levels, then it's desperately unhealthy and it will fail."

Given that most of the activity against the Hong Kong dollar has occurred in the stock market, it made sense for the government to "take fire to the enemy and attack them there."

But asked whether circuit breakers were preferable to intervention as a method to stagger future declines, Ballingal answered an unequivocal "Yes."

And he does expect to see further declines, given the level of Hong Kong interest rates, which are trading at nearly 700 basis points over equivalent US interest rates.

"Frankly, if you're trading 700 over you're a banana republic, and I don't think Hong Kong is," Ballingal said.

Hong Kong's three-month interbank rate was 10.78 per cent on Thursday compared to the US three-month at 4.92 per cent.

With rates at these levels, further declines in the stock market were certain, said Ballingal. Even if Hong Kong's risk premium returned to 300 basis points -- implying prime at about eight per cent rather than its current level of 10 per cent -- the Hang Seng has further to fall, he said.