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HKC100
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132744
MDHIAN 6579
RESTRICTED
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1720
OF 26103OZ MAY 89
INFO IMMEDIATE WASHINGTON, PEKING
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STATE OF HONG KONG MARKET: 26 MAY 1989
SUMMARY
1. HANG SENG INDEX CLOSED 13 POINTS UP AFTER A DAY OF AGGRESSIVE TRADING. THE MONEY MARKET REMAINED STABLE WITH THE HONG KONG DOLLAR FIRMING SLIGHTLY TO 7.7760 TO THE US DOLLAR.
DETAILS
2. FOLLOWING A DROP OF 256 POINTS ON THURSDAY, THE HANG SENG INDEX FELL 56 POINTS IN THE FIRST HALF HOUR OF TRADING TODAY. THE BIG SELL-OFF PREDICTED BY MANY BROKERS FAILED TO MATERIALIZE AND THE
MARKET STAGED A REBOUND TO RECOUP SOME 40 POINTS TO 2735 AT THE MORNING CLOSE. IN THE AFTERNOON, THE INDEX FELL INITIALLY BUT REGAINED SOME 37 POINTS IN THE LAST HALF HOUR OF TRADING TO CLOSE AT 2765. THE INDEX GAINED 13 POINTS IN TOTAL FOR THE DAY AT A TURNOVER
OF HK DOLLARS 2.5 BILLION.
3. THE DAY WAS MARKED BY AGGRESSIVE TRADING WHICH DROVE THE INDEX SWINGING WITHIN AN 80 POINT RANGE, WHICH WAS SMALL IN COMPARISON WITH THE WILD SWINGS EARLIER IN THE WEEK. THERE HAD BEEN ACTIVE BARGAIN HUNTING AS WELL AS PROFIT TAKING. THE SENTIMENT
REMAINS BEARISH ON THE POTENTIAL TURMOIL IN CHINA. IT IS EXPECTED THAT THE MARKET WILL STAY VOLATILE UNTIL THE LEADERSHIP CRISIS HAS BEEN RESOLVED. IN THE PAST SIX TRADING DAYS, THE HANG SENG INDEX DROPPED A TOTAL OF 512 POINTS.
4. THE HANG SENG INDEX FUTURES CLOSED AT A DISCOUNT TO THE SPOT MARKET. THIS AGAIN REFLECTED A LACK OF CONFIDENCE IN THE MARKET AND ALSO INVESTORS' REACTION TO THE INCREASE IN THE MARGIN REQUIREMENTS. A TOTAL OF 3009 CONTRACTS WERE TRADED, WITH THE JUNE CONTRACTS CLOSING AT 2660 AND THE AUGUST CONTRACTS CLOSING AT 2700 NO OCTOBER CONTRACT WAS TRADED TODAY.
5. THE MONEY MARKET WAS STEADY WITH THE HONG KONG DOLLAR ENDING THE
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