B. HONG KONG ECONOMY
CONFIDENTIAL
Hong Kong Stock Market and Exchange Rate Fluctuations
8. Sharp fluctuations in Hang Seng Index more common than in
western Stock Exchanges. Of course uncertainty over Hong Kong's future periodically affects market but there are other factors eg
world recession, worldwide strength of US dollar, high international
interest rates. State of Hong Kong's economy basically very sound.
Cause for concern is political not economic.
Recent Measures to Stabilise the Hong Kong Dollar
9. In September and October, Hong Kong Government took certain
measures to stabilise the Hong Kong dollar. Key element was
and indirect linking of Hong Kong US dollar at a rate of Hong Kong
dollars 7.80=US dollars 1, and abolition of local tax
Socal tax
paid on Hong Kong dollar deposits. Hong Kong Market and currency
have responded well. Interest rates are moving down.
Hong Kong's Economic Prospects
10.
The economy has shown encouraging developments this year and export-led recovery is clearly underway. Trade is set to expand by over 10% in the current year. In October domestic exports were 48% up and imports 44% up compared with the same month last year.
11.
Hong Kong Government is committed to major public works
for the future. It is now) projects and long-term social programmes formulating a development strategy to meet the needs of the territory into the 1990's and the
next century.
CONFIDENTIAL