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Wednesday, February 28, 1973
This general hardening of interest rates in London, he said, meant
that there would be, if the market did not improve before then, a book
loss of about $190 million compared with a gain of $72 million last year.
Mr. Haddon-Cave said that "a much more serious factor" was the
floating of sterling,
The resultant changes in the foreign exchange value of the Hong
Kong dollar had caused an additional reduction of $295 million in the
book value of Hong Kong's investments.
Moreover, the free surplus of $913 million in the Exchange Fund,
which was taken into account in estimating Hong Kong's total fiscal
reserve position at March 31, 1972, had been wiped out," the Financial
Secretary said.
This was because of the weakness of the gilt edged market and
the obligation to make compensation payments to the banks under the
Exchange Fund Guarantee Scheme for the losses in Hong Kong dollar terms
they incurred on their sterling investments.
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