CONFIDENTIAL

COVERING SECRET

Mr Herd

ECONOMISTS DEFT

Mr Hall

FRD

separate copies

Mr Reith CSAD

Reference.....

KK 102/1

wa

19

HONG KONG:

INVESTMENTS IN SOUTH AFRICAN STOCKS AND STERLING HOLDINGS

1. I am most grateful to Mr Herd for his further minute of 18 March (copied to Mr Hall) in reply to mine of 16 March.

2. The Governor of Hong Kong's later of 15 March (received 22 March) in reply to Mr Murray's of 22 February explains the position with regard to the Hong Kong Government's investments in South African stocks. Mr Cortazzi has minuted that the Governor': account or the situation looks all right and has asked me to submit the Governor's letter. I attach a draft submission, which draws heavily on Mr Hard's minutes of 14 and 18 March. Mr Hall will note that I have highlighted the role of the Crown Agents in relation to Hong Kong's investments in South African stocks. (Paragraph 3 of the Governor's letter and paragraph 2(a) of Mr Smith's minute of 25 March are relevant.)

3. Mr Reith will wish to be aware that after seeing Mr Stewart's submission of 16 February, Mr Rowlands said that he would like to see the papers again when the Governor of Hong Kong had replied to Mr Murray's letter. I have therefore marked a copy of the proposed submission to PS/Mr Rowlands.

6 April 1977

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DJ. F. Milton

D F Milton

Hong Kong Department K 247

233 4381

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