mg.ac/McIntyre/3.28.1
HM Treasury
SECRET
ET MON
Nigel Cox
Hong Kong Department
Foreign and Commonwealth Office
Whitehall Buildings
LONDON
SW1A 2AH
GROIT,
Parliament Street London SWIP 3AG Telephone 071-270
4699
M4B 101/1 plcc to Broadbent, & Advice?" /ins
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12811.
28 January 1992
AM
Dear Nigel.
HONG KONG:
CONFIDENTIAL FINANCIAL DIALOGUE
9
LOGUE
Thank you for your letter of 16 January. I have since seen
Chris Elston's letter of 23 January with the Bank's comments.
I have no comments on agenda items A, B and E.
On C, the proposed new liquidity adjustment facility, I agree with the Bank that it would be preferable for the Hong Kong authorities to await the outcome of the Latter/Page review of monetary arrangements before reaching conclusions on this.
Turning to D, this is the most difficult of the proposals to assess. I can see that publishing what would be regarded as good figures would help to increase confidence, though one can also imagine circumstances in which publication of a large decline in the reserves could exacerbate an already difficult situation in the markets if, for example, the link with the US dollar were under pressure.
On balance, I would not oppose publication in the form and with the frequency suggested by the Hong Kong authorities. As I understand it, there would be an annual publication of the figures, six months in arrears. (This would be the routine following the initial statement in the Budget in March this year giving figures for the years up to 1990). With this time lag, the risk of the figures causing difficulties in the markets should be reduced. One further possibility which Hong Kong might like to consider is to make it clear in the initial announcement that the figures will be published at a certain time each year, so that a routine announcement will be expected.
I think we would want an opportunity to consider any proposals for more frequent or earlier publication of figures which might prove more awkward in times of market disturbance.
My two other points are really questions. First, I was not entirely clear from the proposals whether the Hong Kong authorities would be able to use their forward book to adjust their end of year balance sheet figures if they thought that desirable. Or would the published figures include both spot reserves and the value of forward contracts?
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