Sec. 1/2062/46.
CONFIDENTIAL.
Ryat..
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Colonial Secretariat,
HONG KONG.
2nd December,1948.
(4)
Dear Bordi
Roerdillon,
dillon,
You will recollect that when I was in London I discussed with you, and also with Caine, the question of further Loan Issues when this becomes necessary.
2.
There was general acceptance of the position that there was little chance of making a further successful issue locally of the 31% Rehabilitation Dollar Loan, except up to a figure of possibly twenty million dollars. In these circumstances, it was decided that we should next investigate further the possibility of a premium bond issue, though this would depend on the successful establishment of a syndicate which would be prepared to take up the whole issue at probably something just below par, and dispose of it to the public at whatever price they could obtain.
3.
The next possibility which was mentioned was the floating of a loan in Australia, though it was realised that it did not necessarily follow that because such an arrangement had been concluded in the case of Fiji, which has very close ties with Australia, it would be possible to obtain similar facilities in the case of Hong Kong. Only after all these possibilities had been exhausted would the question of the issue of a loan on the London market either by public subscription or through some of the private banks be considered.
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As we have repeatedly emphasised, no local issue stands the slightest chance of success unless it is in the form of bearer bonds, and this is particularly the case of course in regard to any premium bond issue. However, objections to further bearer issues were raised in the Secretary of State's telegram No.334 of 10th March, 1948, because of the possibility of exchange control leakage.
5.
Portsmore, after investigating the matter on the spot, expressed the view that the danger of leakage was more apparent than real as long as the bonds were expressed in Hong Kong dollars and not in sterling denominations. In this form they are in practice extremely difficult to dispose of except on the Hong Kong stock exchange, and would certainly not prove attractive to persons whose only object was the export of capital. I gather that the Bank of England accepted Portsmore's views but up to the time I left London the Treasury had not given any indication as to whether they had modified their attitude in regard to bearer bond issues.
H.T.Bourdillon, Esq., Finance Department,
Colonial Office,
Sanctuary Building, . Great Smith Street,
London.S.W.1.