11
WEDNESDAY, FEBRUARY 25, 1976
+WHETHER HONG KONG'S PRICES MOVE WITH WORLD PRICES OR, FOR A SHORT TIME, DIVERGE AND MOVE AT A HIGHER RATE, WILL LARGELY DEPEND ON HOW THE LIQUIDITY OF THE BANKING SYSTEM IS USED.
+AN INCREASE OF SIX PER CENT IN HONG KONG'S PRICES IS BROADLY IN LINE WITH LIKELY DEVELOPMENTS IN WORLD PRICES, AND THIS IS THE IMPLICIT INFLATOR USED IN THE GDP FORECAST, GIVING A 15 PER CENT INCREASE IN THE GDP IN MONEY OR CURRENT PRICE TERMS,+ HE ADDED.
MR. HADDON-CAVE SAID HE WAS VERY CONSCIOUS OF THE PRESSURES THAT WOULD BE PUT ON THE CONSTRUCTION INDUSTRY, BOTH BY THE GOVERNMENT'S CAPITAL WORKS PROGRAMMES AND THE MASS TRANSIT RAILWAY, AND BY THE DEMAND IN THE PRIVATE SECTOR FOR CERTAIN KINDS OF PROPERTY.
HE SAID THERE WAS A SPECIALLY STRONG LINK BETWEEN FINANCIAL AND PROPERTY ASSETS IN HONG KONG AND THERE WAS SCOPE FOR PRESSURE ON THE CONSTRUCTION INDUSTRY AND HENCE ON PROPERTY PRICES TO FEED BACK ON TO THE PRICES OF FINANCIAL ASSETS, ESPECIALLY IF ENCOURAGED BY BANK LENDING.
ALL THIS, HE SAID, COULD COMBINE TO PRODUCE PRICE INCREASES IN OTHER SECTORS THAT WOULD BE OUT OF LINE WITH THE REST OF THE WORLD, EVEN IF ONLY FOR A SHORT PERIOD.
NEVERTHELESS THE FINANCIAL SECRETARY THOUGHT THAT THE GOVERNMENT'S AND THE COMMUNITY'S RECOLLECTION OF THE EVENTS OF 1972-73 WAS SUFFICIENTLY VIVID TO MAKE A REPETITION UNLIKELY AND THE FORECAST, THEREFORE, ASSUMED THAT HONG KONG DID NOT DIVERGE FROM WORLD DEVELOPMENTS.
THE FINANCIAL SECRETARY MADE A SPECIFIC REFERENCE TO THE STOCK MARKET DURING THE 12 MONTHS ENDING JUNE 30, 1973 WHICH COVERED THE GREATER PART OF THE STOCK AND PROPERTY MARKET BOOM.
HE SAID THAT DURING THAT PERIOD 190 COMPANIES WENT PUBLIC. OF THESE, OVER TWO-THIRDS USED THE METHOD OF PRIVATE PLACEMENT AND LESS THAN ONE-THIRD THE ORTHODOX METHOD OF DIRECT OFFER TO THE PUBLIC.
MR. HADDON-CAVE POINTED OUT THAT THE METHOD OF PRIVATE PLACEMENT HAD SOME DECIDED DISADVANTAGES FOR INVESTORS AND SHOULD ONLY BE ACCEPTED IN CERTAIN CIRCUMSTANCES.
THE UNRESTRICTED USE OF THIS METHOD IN 1972-73, HE SAID, GAVE RISE TO PRACTICES WHICH LEFT MUCH TO BE DESIRED.
THE FINANCIAL SECRETARY GAVE A WARNING THAT SHOULD THE CURRENT RECOVERY IN CONFIDENCE IN THE STOCK” MARKET RESULT IN AN UPSWING
IN THE NUMBER OF COMPANIES GOING PUBLIC, THE METHOD OF PRIVATE PLACE- MENT WOULD BE SUBJECT TO CLOSE REGULATION BY THE SECURITIES COMMISSION UNDER THE AUTHORITY CONFERRED BY THE SECURITIES ORDINANCE.
192