RESTRICTED
RESTRICTED
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1763
OF 311015Z MAY 89
HKC100/1
INFO IMMEDIATE WASHINGTON, PEKING
TOP COBY O DIST
35
142235
MDHIAN 7032
STATE OF HONG KONG MARKET : 31 MAY 1989
SUMMARY
THE HANG SENG INDEX TUMBLED ANOTHER 62 POINTS ON THIN TURNOVER. THE MONEY MARKET REMAINED STABLE WITH THE HONG KONG DOLLAR FIRMING SLIGHTLY TO 7.7745 TO THE US DOLLAR.
DETAILS
2. FOLLOWING THE 40-POINT FALL ON TUESDAY, THE HANG SENG INDEX DROPPED 36 POINTS IN THE FIRST HALF HOUR OF TRADING TODAY. THE INDEX CONTINUED TO FALL THROUGHOUT THE MORNING AND CLOSED AT 2737, WITH A LOSS OF 68 POINTS. IN THE AFTERNOON, THE INDEX RECOVERD SLIGHTLY AND CLOSED AT 2743. THE TOTAL LOSS FOR THE DAY WAS 62 POINTS, WITH A TURNOVER OF HKDOLLARS 921 MILLION.
3. FEAR OF A BLOODY CONFRONTATION LINGERED IN THE MARKET AND THE STATE OF THE POWER STRUGGLE IN CHINA REMAINED UNCLEAR. INVESTORS TOOK THE OPPORTUNITY TO GET OUT AT THIS TIME IN ORDER TO TAKE PROFIT OR TO CUT LOSS. GIVEN THE RELATIVELY THINNER TURNOVER, THE INDEX MOVEMENTS WERE SOMEWHAT EXAGERATED BUT THE FALLING TREND WAS PRONOUNCED. SINCE THE LAST STABLE TRADING DAY ON 18 MAY 1989, THE INDEX HAS FALLEN BY SOME 534 POINTS, REPRESENTING A LOSS OF 16 PERC- ENT.
4. TRADING IN THE HANG SENG INDEX FUTURES MARKET REMAINED DULL, WITH A TOTAL VOLUME OF 1268 CONTRACTS. THE JUNE CONTRACT CLOSED AT 2720, A 23 POINT DISCOUNT TO THE SPOT MARKET. THE AUGUST CONTRACT CLOSED AT 2760 WITH A SLIGHT 17 POINT PREMIUM TO THE SPOT MARKET. ONLY 78 CONTRACTS WERE TRADED FOR THIS MONTH. NO OCTOBER CONTRACT WAS TRADED. THE BID-PRICE AND THE ASK-PRICE STILL VARIED BY SOME 80 POINTS.
5. THE MONEY MARKET REMAINED STEADY TODAY WITH THE HONG KONG DOLLAR EXCHANGE RATE FIRMING SLIGHTLY TO 7.7745 TO THE US DOLLAR AND INTERE-
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