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X
37
not appear to be greater now than during the past few years.
Incidentally, issue before 31st December entails redemption
of 1/25th of the bonds in July 1940, whereas issue in 1940
would not involve any redempt ion until July 1941 see
Section 5 (2) of the Ordinance. It appears that any revenue
available for permanent allocation to this expenditure could,
during postponement of issue, be used to reduce the amount
which must eventually be raised. At least, the amount of
redemption payments on the loan if raised would be available
for the purpose, while the annual loan interest saved by
postponement will presumably be greater than the income which
would otherwise be earned on the Government's surplus
balances.
5. One way of avoiding a local issue to the public at so
low a price as 93, would be for the Hong Kong Government
itself to take up the whole of the issue either at 93 or any
other figure which it considered fair and show it in its
accounts as an investment held for Surplus Funds. The bonds
could be sold from time to time, as opportunities occurred,
and at the current market price, and replaced by other
shorter dated securities. The Hong Kong Government says
"the bulk of the proceeds would in any case be invested in
short term investments or placed on fixed deposit for a
substantial period as no immediate need of cash is foreseen".
The latest market price of the loan (obtained from the
Hong Kong and Shanghai Bank) is 97 on the 16th November, and
if the Government did not wish to take the risk of market
depreciation in the price of so large a holding of bonds
having an average life of 121⁄2 years, it might well be able
to realise a considerable part without delay at a price
better than 93. (121⁄2 years would be the average life of
twenty-five year bonds redeemed by annual drawings, though
owing to the passage of time the remaining bonds issued in
1934 have now an average life of 10 years only).
6.1 JU
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