THE TIMES
17 DEC 1973
∙H.K.
cutting dated
19
HR
MEZ
요ᅲ
Hongkong's sterling reserves guaranteed
at rate of $2.4213
Hongkong, Dec 16.-The Hongkong government said it has reached an understanding with Britain under which the colony's official sterling reserves will be guaranteed until March 31, 1974, at the rate of $2.4213.
The agreement, which re- places the unilateral offer made by the British Government after the expiry of the original Basle agreement, specifically excludes the sterling balances held by local banks.
The Hongkong government does not publish figures of reserves but last September they were estimated at £700m, of which between a third and a quarter were balances held by the banks.
A Government statement said the decision to exclude the bank boldings from the guarantee "reflects the fact that the ster ling holdings of local banks are no longer judged to be suffici ent to warrant their inclusion ".
informed banking sources said the local banks sold sterling for ward in the early summer and after the ending of the agree ment in September began to unwind their position,
This leaves them as fully diver sified out of sterling as they feel is necessary. Their exclusion from the new agreement will not cause any problems, the sources said.
statement
The Government made no mention of whether the present agreement allows Hong- kong to diversify out of sterling in the next few months. Under the original five-year agreement Hongkong was obliged to keep 89 per cent of its official reserves in sterling.
Mr Philip Haddon Cave, the Hongkong financial secretary, said the new agreement is satis- factory to both governments.- Reuter.
Our Economics Staff writes:
longkong's sterling
reserves
have been a bone of contention with London ever since the November, 1967 sterling devalua-
tion.
As a Crown Colony, the Hong- kong authorities do not have the freedom enjoyed by others to handle their reserves like an ordinary
official holder of sterling. They were, therefore, forced to take a substantial loss in the value of their reserves in November, 1967.
During the early part of 1968 the Colony's government insisted on some form of future guaran- tee of the value of their sterling
reserves.
This was finally nego- tiated and led on to the more generalized guarantee arrange. ments for all official holders of sterling, known subsequently as the Basle Arrangements.
RECEIVED IN REGISTRY No. 51
28 DEC1973
HKK 51
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