1990-08-22 12:03 MONETARY AFFAIRS BRANCH
A52 865 5850 P.03
Further gyrations in local share prices are expected in the near term, given the uncertainties over developments in the Middle East. In the longer term, the direction of the stock market will be influenced by factors such as the effect of the Gulf crises on the economic performance of HK's major trading partners and the implications on interest rates given the increased difficulty of the US to cut its budget deficit as a result of increased defense expenditure.
A further worsening of situation in the Middle East may invite speculations on the currency front. The HK$, while remaining stable against the US$, may experience some fluctuations against other major currencies.
We have given permission for the continued discretionary management in Hong Kong of several portfolios of securities on behalf of residents of Kuwait. This permission is subject to conditions including one which prevents control of the assets from leaving Hong Kong and is in line with Bank of England practice.