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A
Mr. David Li seems to take a different view, that no
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acceptable solution which would safeguard the integrity of
our securities markets would be forthcoming in this way. The likely solution, in the absence of Government's
involvement, and I take it the one that Mr. Li seems to have
been advocating, was one that required a closing out of
contracts at an arbitrary price. In discussing this
solution, we are straying into the realms of
unpredictability but almost certainly there would have been
a serious knock-on effect in the stock market itself, the
likely permanent closure of the futures market, and serious
damage to Hong Kong's continuance as an international
financial centre.
20.
I also considered the possible consequences had
the Guarantee Corporation not been able to meet its
obligations when trading on the Futures Exchange resumed.
It was clear to me that this would have led to a complete
collapse of the Guarantee Corporation and the Futures
Exchange. As I have said, this would have been very
damaging to Hong Kong's reputation as an international
financial centre. Further, with the close links between
the Futures Exchange and the Stock Exchange through the
hedging on Hang Seng Index Futures of physical holding of
shares, there was also a serious risk that the Stock
Exchange would be similarly affected. Had this happened,
there would doubtless have been a massive outflow of
capital, which would in turn have created unacceptable pressure on the exchange value of the Hong Kong Dollar.
FC
PC