SECRET
kad dark at my kids d
ABOUT THE FUTURE ARRANGEMENTS, IF ANY, FOR GUARANTEEING THE FOREIGN EXCHANGE OR HONG KONG DOLLAR VALUE OF OUR STERLING BALANCES WHICH REALLY WORRIES US. AND WE HAVE JUST BEEN INFORMED THAT THE SENIOR UNOFFICIAL MENDER HAS GIVEN NOTICE OF THE FOLLOWING QUESTION AT THE NEXT SITTING OF THE LEGISLATIVE COUNCIL ON 18TH JULY NEXT, VIZ:
4.
"'INVIEW OF THE UNCERTAINTIES IN THE WORLD MONETARY SITUATION AND THE EXXPIRY OF THE U.K. STERLING GUARANTEE TO HONG KONG ON 24TH SEPTEMBER, 1973, WILL GOVERNMENT STATE WHETHER RE- NEGOTIATIONS HAVE ALREADY STARTED AND WHAT IS THE PRESENT POSITION?''
AS THE REVIEW COMTEMPLATED IN THE CHANCELLOR'S MESSAGE IN TELEGRAM 911 OF 20TH OCTOBER DID NOT TAKE PLACE AND WE ARE STILL COMPLETELY IN THE DARK AS TO H.M.G.'S INTENTIONS, WE ARE AT A LOSS AS TO WHAT TO SAY AND WOULD BE GRATEFUL, THEREFORE, FOR YOUR ADVICE.
5. MEANWHILE, NOW THAT FOREIGN EXCHANGE IS MORE FREELY AVAILABLE AGAIN, THE HONG KONG BANK IS PLANNING TO RESUME SWITCHING OUT OF STERLING INTO OTHER NON-HONG KONG DOLLAR ASSETS IN ACCORDANCE WITH THE ARRANGEMENTS SET OUT IN BELL'S LETTER TO HADDON-CAVE OF 1ST DECEMBE, 1972. APPROXIMATELY POUNDS 89 MILLION REMAINS TO BE UTILISED. THIS WILL REDUCE THE HONG KONG BANK'S OPEN STERLING POSITION BEFORE 24TH SEPTEMBER TO POUNDS 66 MILLION WINCH. WILL PROBABLY SATISFY THEM: BUT THIS WILL NOT HELP THE OTHER PART- ICIPATING BANKS. THE CHARTERED BANK AND THE HANG SENG BANK HAVE BOTH EXPRESSED CONSIDERABLE ANXIETY ABOUT THEIR POST-24TH SEPTEMBER STERLING POSITIONS: AND HAVE EMPHASISED HOW IMPORTANT IT IS THAT THEY SHOULD BE PERMITTED TO REDUCE THEIR POSITIONS OVER THE NEXT TWO MONTHS. IF THIS IS NOT POSSIBLE BY AN EXTENSION OF THE BELL POUNDS 100 MILLION FACILITY, THEIR ONLY ALTERNATIVE WOULD SEEM TO BE TO START SELLING STERLING FORWARD FOR FOREIGN CURENCIES BEFORE THE PRESENT PREMIUM ON THE FORWARD RATE IS DISCOUNTED. OPINION HERE IS THAT THIS IS BOUND TO HAPPEN AS THE END OF THE STERLING GUARANTEE AGREEMENT PERIOD APPROACHES,
--2- SECRET
16..