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Thursday, March 16, 1972
He recalled that an agreement was reached in June 1968 between
the United Kingdom and Hong Kong whereby the U.K. was to issue Hong Kong
Dollar bonds to protect the Hong Kong dollar value of the Colony's sterling
funds in the United Kingdom.
"This arrangement was, however, substituted in September 1968
by a Sterling guarantee which gave protection to the official Sterling
assets deposited by all Commonwealth countries in the United Kingdom that
the value of Sterling would not be less than US$2.40," he added.
Mr. Lee pointed out that the advantages of putting a part of
Hong Kong's reserves in London was obvious because, besides that guarantee
attraction, London had a large money market capable of offering good
returns and sound investment opportunities for them.
Investments
The yield from the Colony's United Kingdom investments was
higher than that from Hong Kong, he added.
"Notwithstanding these advantages, however, we must always
consider how safe are our reserves against future monetary crisis affecting
Sterling.
"I think the time has now come when we should re-appraise our
situation seriously," he said.
Mr. Lee pointed out that since the re-alignment of all major
currencies in the world in December last year, the parity of Sterling had
been raised from US$2.40 to US$2.6057.
"This almost completely changes the character of the Sterling
guarantee for it is only below this rate will Hong Kong be qualified for
protection and therefore, for all intents and purposes, the United Kingdom
Sterling guarantee now means very little to Hong Kong," he said.
/He went
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