CO129-605-5 Government loans 4-2-1948 - 8-1-1949 — Page 46

Dear Kelvin Stark,

Bank of England,

London, E.c. 2.

12

46

3rd November, 1948.

(10)

With reference to your letter of the 26th October (54126/4/48), we have come to the conclusion that since the Chinese will not subscribe to anything except bearer issues and in view of the special circumstances of Hong Kong there would be no advantage at present in pressing further for the registration of the existing issue or the compulsory deposit of the bonds with approved banks.

analgje pë

2

The fact is that there is no market for Hong Kong securities outside Hong Kong and such securities are not usually owned by non-residents except for a limited number of people who have left Hong Kong, having acquired securities while resident there. With the exception of Chinese there is little demand by non-residents to invest in Hong Kong.

る

Non-resident holders, such as there are, can sell their securities freely but cannot withdraw their funds from Hong Kong except to China or through the U.S.dollar free market because although the proceeds of sale could be credited to non-resident accounts such accounts do not carry the automatic right of transfer and the Hong Kong Control would not approve an application to remit funds arising in this way. We would agree, therefore, that the issue of these bearer bonds does not give anybody the opportunity of getting out of sterling on any better terms than they can already through the free market.

In view of the considerations referred to above there does not seem any point in attempting to impose the usual restrictions on the present issue which is one which will appeal primarily to Chinese investors.

As regards the general question we should prefer, however, to reserve our position having in mind not only the case of the Hong Kong Brewery but also the fact that we have under consideration a circular telegram to all the Colonies explaining the subject of securities control in the light of the Exchange Control Act.

I am sending a copy of this letter to Marshall.

Yours sincerely,

Sportamore

D.Kelvin Stark, Esq.