TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 165

00 F C C

CRPS250

CYPHER/CAT A

[ORWELL]

FM HONG KONG 195645Z

SECRET

REGISTRY No. 51

OCT 1973

IMMEDIATE Peksli

いと火

ADVANCE COPY

TO IMMEDIATE F C O TELNO 1155 OF 18TH OCTOBER 1973.

YOUR TELEGRAM NUMBER 1012.

STERLING GUARANTEE.

186

1

A

(189)

P/S MR ROYLE MR YOUDE

HEAD OF FRD.

I

HEAD OF SOF)

YOUR PARAGRAPH 2: THE ANSWER TO YOUR QUESTION IS NO, THE FIGURES ARE NOT DIRECTLY COMPARABLE. THE FIGURE OF

17/10/9

to Mr DA Walker Treasury

10/10

POUNDS 295 MILLION ADVISED BY THE ACCOUNTANT GENERAL FOR 3187 JULY WAS THE AMOUNT OF COVER HELD UNDER THE EXCHANGE FUND GUARANTEE SCHEME BY THE 27 PARTICIPATING BANKS. THE FIGURES FOR ALL REPEAT ALL. BANKS AT 31ST JULY WERE READY POSITIONS POUNDS 228 MILLION AND NET OVERBOUGHT POSITIONS POUNDS 228 MILLION (AGAINST POUNDS 213 MILLION AND POUNDS 119 MILLION RESPECTIVELY AT THE END OF AUGUST).

2. YOUR PARAGRAPH 3 THE ANSWER TO YOUR QUESTION IS YES, BUT VE REPEAT THAT THE FIGURE OF POUNDS 60 MILLION IS A VERY ROUGH ESTIMATE. WE SHALL KNOW MORE WHEN WE SEE THE BANKS RETURNS FOR THE END OF SEPTEMBER (IN ABOUT 3/4 WEEKS TIME).

3 YOUR PARAGRAPH 4: WE ARE OF THE VIEW THAT THE BANKS WILL MAINTAIN A NET OVERBOUGHT FOSITION (DEFINED AS THE TOTAL OF READY POSITIONS PLUS FORWARD PURCHASES LESS FORWARD SALES) AT ANY RATE SO LONG AS LONDON INTEREST RATES REMAIN AT THEIR PRESENT LEVELS, BUT WE CERTAINLY DO NOT KNOW WHETHER THE TOTAL OF THEIR NET OVERBOUGHT POSITIONS WILL REMAIN AS HIGH AS POUNDS 60 MILLION FOR THE NEXT FEW MONTHS. FROM 25TH SEPTEMBER THE BANKO, FOR THE FIRST TIME, HAVE NEITHER STERLING AREA NOR STERLING GUARANTEE RESTRICTIONS UPON THEM AND THEIR OVERBOUGHT POSITIONS IN STERLING WILL DEPEND ON THEIR COMMERCIAL OBLIGATIONS (INCLUDING SALES OF STERLING TO THE BANK OF CHINA) AND THE VIEW THEY TAKE OF STERLING. ONLY EXPERIENCE WILL GIVE US AN INDICATION OF THE LEVEL WHICH THEY WILL COME TO REGARD AS NORMAL.

MACLEHOSE

NNNN

J

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