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WEDNESDAY, NOVEMBER 11, 1987
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BUT THE LIKELY 'SOLUTION" IN THE ABSENCE OF THE GOVERNMENT'S INVOLVEMENT, WAS ONE THAT REQUIRED A CLOSING OUT OF CONTRACTS AT AN ARBITRARY PRICE. "THERE WOULD HAVE BEEN A SERIOUS KNOCK ON EFFECT IN THE STOCK MARKET ITSELF, THE LIKELY PERMANENT CLOSURE OF THE FUTURES ᎷᎪᎡᏦᎬᎢ . AND SERIOUS DAMAGE ΤΟ HONG KONG'S CONTINUANCE AS AN INTERNATIONAL FINANCIAL CENTRE.
THE FINANCIAL SECRETARY ALSO SAID THAT HE HAD CONSIDERED THE POSSIBLE CONSEQUENCES HAD THE GUARANTEE CORPORATION NOT BEEN ABLE TO MEET ITS OBLIGATIONS WHEN TRADING ON THE FUTURES EXCHANGE RESUMED.
HE SAID:
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'IT WAS CLEAR TO ME THAT THIS WOULD HAVE LED TO A COMPLETE COLLAPSE OF THE GUARANTEE CORPORATION AND THE FUTURES EXCHANGE.
"WITH THE CLOSE LINKS BETWEEN THE FUTURES EXCHANGE AND THE STOCK EXCHANGE THROUGH THE HEDGING ON HANG SENG INDEX FUTURES OF PHYSICAL HOLDING OF SHARES, THERE WAS ALSO A SERIOUS RISK THAT THE STOCK EXCHANGE WOULD BE SIMILARLY AFFECTED,
"HAD THIS HAPPENED, THERE WOULD DOUBTLESSLY HAVE BEEN A MASSIVE OUTFLOW OF CAPITAL, WHICH WOULD IN TURN HAVE CREATED UNACCEPTABLE PRESSURE ON THE RXCHANGE VALUE OF THE HONG KONG DOLLAR."
ANSWERING CRITICISM ON THE USE OF THE EXCHANGE FUND, MR JACOBS SAID IT WAS HIS RESPONSIBILITY AS FINANCIAL SECRETARY TO USE THE EXCHANGE FUND "FOR SUCH PURPOSES AS THE FINANCIAL SECRETARY THINKS FIT" TO STABILISE THE EXCHANGE VALUE OF OUR CURRENCY.
HE NOTED THAT PRIOR ΤΟ THE FORMAL INVOLVEMENT OF THE GOVERNMENT IN TALKS LEADING TO THE RESCUE PACKAGE, THERE HAD BEEN ADVERSE PRESSURE ON THE EXCHANGE RATE REQUIRING SUBSTANTIAL INTERVENTION FROM THE EXCHANGE FUND. "IT IS SIGNIFICANT THAT ON THE EMERGENCE OF THE RESCUE PACKAGE THAT PRESSURE EASED, HE SAID.
ON HIS NOT HAVING CONSULTED WITH THE EXCHANGE FUND ADVISORY COMMITTEE, MR JACOBS SAID HE WAS NOT REQUIRED BY SECTION 3(1) OF THE EXCHANGE FUND ORDINANCE TO CONSULT WHENEVER HE USED THE EXCHANGE FUND, ADDING THAT IT WOULD BE IMPRACTICAL TO DO so.
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AS TO WHETHER THE GOVERNMENT COULD HAVE PRESSED SHAREHOLDERS OF THE GUARANTEE CORPORATION TO CONTRIBUTE MORE ΤΟ PACKAGE, MR JACOBS SAID HE WAS SATISFIED WITH AND GRATEFUL FOR SUPPORT GIVEN BY THE SHAREHOLDERS OF THE GUARANTEE CORPORATION, A NUMBER OF BROKERS AND MEMBERS OF THE FUTURES EXCHANGE, AND LAST BUT NOT LEAST, THE BANK OF CHINA.
HE ALSO DREW ATTENTION TO THE FACT THAT THE FIRST TWO CREDIT FACILITIES OF $1 BILLION : THAT IS, THE HK$1 BILLION PROVIDED BY THE SHAREHOLDERS OF THE GUARANTEE CORPORATION, A NUMBER OF BROKERS AND MEMBERS OF THE FUTURES EXCHANGE AND THE HK$1 BILLION PROVIDED BY THE EXCHANGE FUND, WERE STRUCTURED IN SUCH A WAY THAT ANY FUNDS LOANED FROM THE EXCHANGE FUND WERE THE LAST TO BE USED AND THE FIRST ΤΟ BE REPAID.
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