JWL0056
MR ELSTON
From J W Lund
Copies to Mr Crockett
M Laxm Mr Store (Pretty superficial)
Pa
Mr T A Clark Mr Latter
Mr Page
Mr Smeeton
Mars 040
m
Mr Sutherland Mr D A Ware ̋
Mr Miles
J/Min
HONG KONG FINANCIAL MARKETS: FEBRUARY 1992
очер
Mr Milne
Mr A Bulley
Fa
3.3.92
ID Sections 6 9 BSD Group 18
Mr Ricketts (FCO) of
Mr Cox (FCO)
Mr Lane (FCO)
Mr MacIntyre (HMT)
Summary
1
HK$ remained strong at around 7.76 to the US$, as HIBOR
fluctuated above US$-LIBOR. Government bond yield fell slightly,
but stock market remained buoyant.
Explanatory Factors
2 (a) Chinese New Year (4-6 February) meant HK markets were closed.
(b) US rates: US$ Libor eased 0.2% between 6 February and 10
February, but gradually rebounded 0.3% by 20 February and
stabilised around 4.25%.
(c) China factors: In late february the US congress blocked
renewal of China's Most Favoured Nation clause, but HK markets were
unaffected, confident that President Bush will veto this decision.
This confidence was reinforced by Chinese leader Deng Xiaoping's
positive remarks about the role of Hong Kong.
(d) Annual reports season is between January and March. Better than expected results boosted share and warrant prices in HK and
China Gas, and in other firms.
Effects of HK markets
3(a) HK$ remained strong at HK$7.76=US$1, and even stronger than
this rate in the ten days after Chinese new year when trading
resumed in HK, and at the end of the month when buoyed up by
positive China factors (see para 2.c)
(b) HIBOR hovered 0.1-0.5% above US$-LIBOR. 3-month HIBOR started
the month at 4.4%, fell to 4.1% by 10 February, and rose to almost
4.6% by end-February. Despite market pressures (and perhaps due to government pressures), the Hong Kong Association of Banks decided not to lower the prime lending rate, which stayed constant at 8.5%
throughout February.