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HONG KONG: INVESTMENT IN SOUTH AFRICAN STOCK
BACKGROUND
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1. It has emerged from the latest available report from the Hong Kong Government's Director of Auditing Services for the financial years 1974/75 and 1975/76 that the Hong Kong Governmet have some of their surplus financial balances invested in
South African stocks. I attach a table listing 12 different
stocks in which investments have been made. It will be seen
that the Hong Kong Government purchased one new stock, 50,000 DM worth of South African Government 7.75% bonds, in 1975/76 and that other changes in its holdings during the same financial
year resulted in total holdings of approximately £2,832,836 at 31 March 1976 compared to approximately £2,360,949 at 31 March 1975. (Hong Kong dollar values will differ because of fluctuations
in exchange rates.) It is not known when most of the other stocks were originally purchased. Figures for the 1976/77 financial
year would not normally be available to us before December 1977.
2. The South African stocks in which the Hong Kong Government have invested are Euro-currency loans, mainly in Deutschmarks. Most of the stocks held are for general South African Government use (six cases). The others are for the State Electricity Board (ESCOM) and the State Iron and Steel Corporation (ISCOR) (four stocks in one case and two in the other). There are no Hong Kong Government holdings in South African defence bonds to our knowledge.
ARGUMENT
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3. It is clear that the Hong Kong Government have been within their rights in investing funds in South African stocks It would not be consistent with the degree of financial autonomy
that the
CONFI DENI AL