XN000022-1990-02-07 — Page 2

WEDNESDAY,

FEBRUARY 7 1990

1

MAKING EXCHANGE FUND BILLS MORE EASILY MARKETABLE

* * * * *

THE MAIN PURPOSE OF THE INLAND REVENUE (AMENDMENT}

BILL 1990

IS TO EXEMPT FROM TAX ANY INTEREST OR PROFIT ARISING FROM DEBT INSTRUMENTS ISSUED UNDER THE EXCHANGE FUND ORDINANCE FOR THE ACCOUNT OF THE EXCHANGE FUND, THE FINANCIAL SECRETARY, THE HON SIR PIERS JACOBS, SAID IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

TO

MOVING THE SECOND READING OF THE BILL, SIR PIERS SAID HE HAD ANNOUNCED IN HIS BUDGET SPEECH IN MARCH LAST

HIS INTENTION DEVELOP A PROGRAMME FOR THE ISSUE OF SHORT-TERM EXCHANGE FUND BILLS.

YEAR

HE HAD EXPLAINED THAT THIS WOULD PROVIDE A FLEXIBLE, LOW RISK AND COST-EFFECTIVE WAY OF CONDUCTING MONEY MARKET OPERATIONS.

TI

"THESE OPERATIONS ARE CARRIED OUT IN ORDER TO INFLUENCE CONDITIONS IN THE INTERBANK MARKET IN SUCH A WAY AS TO ASSIST IN THE MAINTENANCE OF EXCHANGE RATE STABILITY WITHIN THE FRAMEWORK OF THE LINKED EXCHANGE RATE SYSTEM.

PAPER

"THE BUYING AND SELLING OF GOVERNMENT

IS A METHOD OF

OTHER CONDUCTING MONEY MARKET OPERATIONS. IT IS WIDELY USED IN

MAJOR

FINANCIAL CENTRES, HE SAID.

SIR PIERS SAID THE BILLS WHICH HE INTENDED TO BEGIN ISSUING SOON WOULD BE FOR THE ACCOUNT OF THE EXCHANGE FUND.

THE PROCEEDS WOULD NOT BE AVAILABLE ΤΟ FINANCE PUBLIC EXPENDITURE OF FISCAL DEFICITS.

THEY WOULD BE INVESTED ALONG WITH OTHER ASSETS OF THE EXCHANGE

THOSE FUND AND WOULD BE AVAILABLE ONLY FOR

PURPOSES FOR WHICH THE RESOURCES OF THAT FUND MIGHT PROPERLY BE USED.

"THE BILLS WILL CONSTITUTE DIRECT, UNSECURED, UNCONDITIONAL AND GENERAL OBLIGATIONS OF THE HONG KONG GOVERNMENT FOR THE ACCOUNT OF THE EXCHANGE FUND.

IS,

13 HELD

THAT "NORMALLY, THEY WILL HAVE A MATURITY OF 91 DAYS, WEEKS, AND WILL BE ALLOTTED BY COMPETITIVE TENDER, WHICH WILL BE WEEKLY.

"BIDS WILL BE ACCEPTED FROM RECOGNISED DEALERS ONLY.

AND

"THE MINIMUM DENOMINATION OF THE BILLS WILL BE HK$500,000 THE TOTAL OUTSTANDING AMOUNT IS LIKELY TO BUILD

UP ΤΟ APPROXIMATELY HK$3-4 BILLION BY THE END OF THE FIRST 13-WEEKS CYCLE, HE SAID.

11

SIR PIERS SAID THAT IN DEVISING THIS PROGRAMME, VALUABLE ADVICE FROM THE EXCHANGE FUND ADVISORY COMMITTEE, KONG ASSOCIATION OF BANKS THE HONG KONG DEPOSIT-TAKING ASSOCIATION AND THE HONG KONG CAPITAL MARKETS ASSOCIATION.

+

HE HAD THE HONG COMPANIES

/CONSULTATIONS HAD