17
Wednesday, December 13, 1972
The Financial Secretary also told Council that Hong Kong's
external reserves were still largely held in sterling securities.
It was possible, he added, to select a currency that would
appear more likely to appreciate than depreciate in the short term.
But one difficulty here was that "we tend to invest in the medium and
long end of the market, in order to maximise earnings, and what may
appear correct in the short term may prove very wrong in the longer
tera,"
Mr. Haddon-Cave said decisions had to be taken with the longer
term in mind because, in the uncertain foreign exchange markets of recent
years, it had not been possible to move substantial sums from one currency
to another quickly without unacceptable loss.
Another difficulty in the way of rapid diversification policy was
that those currencies thought by the market in general to be under rather
than over-valued were naturally in short demand.
he said.
*The result is that interest rates are extremely low or even negative,
Mr. Haddon-Cave added: "Thus the attractions of switching out
of sterling on a major scale, at least until September 1973 when the
present agreement expires, are small."
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IF