11.2.87
MONETARY ISSUES
SECRET
12
23.
I turn now to monetary issues. The better than
expected performance of the economy in 1986, and the lower
and declining interest rates over the year have led to a
general improvement in asset prices, most noticeably those
of financial assets. The stock market, for example, has
performed strongly, helped by the inflow of foreign
investment funds into Hong Kong to take advantage of the
potential returns available here.
24.
I am happy to report that the exchange rate has
continued to demonstrate remarkable stability, remaining
for most of the time within a narrow range against the US
dollar. There was, nevertheless, spasmodic speculation
based on unfounded rumours of a possible change in the
link.
25.
Although such speculative activity was short
lived, I reiterate that the Government has no intention of
tampering with the link. The linked exchange rate system
is a crucial element underlying the stability of our
SECRET
S