TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 150

5. We also draw attention to para 5 of our tel no. 1133

which applies mutatis mutandis with the modified valuation

basis. This means that there may be circumstances, even

on the market valuation basis, in which sterling purchases

are required consistently with the terms of the Declaration.

We interpret para 2 of your tel. no. 1361 as indicating that

you accept this, but would be grateful for confirmation

that there is no misunderstanding on this point.

6. We have felt able to accept this switch to market

valuation, and a lower MSP corresponding to that basis, in

the light of your special difficulties in this matter,

which we recognise.

holders would see this modification in the same light, and

it is therefore essential that this be handled with very

great discretion. This emphasises the importance

But it is most unlikely that other

presentationally of sticking as closely as possible to the

line set out in para 7 of our tel. no. 1133, namely that

Hong Kong's participation is based on the reserve position

at the expiry of the former Agreement, but with adjustments

made to take account of the non-participation of the banks

in the new arrangement.

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