TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 156

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ORWELL

TAKK SLL...

TO IMMEDIATE F C O TELNO 1361 OF 27TH NOVEMBER, 1973.

YOUR TELEGRAM NUMBER 1209.

STERLING GUARANTEE.

WE

VALUATION USING OUR CONVENTIONAL BASIS WOULD JUST NOT BE

FEASIBLE FOR US BECAUSE THE EXCHANGE FUND'S ASSETS WILL BE REVALUED

AS AT 31ST DECEMBER AND THE GENERAL FUND'S AS AT 31ST MARCH. DID NOT MEAN TO SUGGEST IT WOULD BE FEASIBLE IN PARAGRAPH 2 OF OUR TELEGRAM 1317. WE WERE SIMPLY MAKING THE POINT THAT THERE

WAS NO STATUTORY BASIS.

2.

AS IT SEEMS MOST UNLIKELY THAT MARKET PRICES OF GILTS

WILL REGAIN THE PAST YEAR'S LOSSES DURING THE NEXT FEW MONTHS (1.E. DURING THE PERIOD OF THE GUARANTEE), THE BOCK VALUES

OF OUR HOLDINGS WILL BE CONSIDERABLY ERODED ON BOTH OF THESE DAYS.

THE SHORTFALL BETWEEN CONVENTIONAL BASIS VALUES AND MARKET VALUES

AS AT 26TH SEPTEMBER WAS POUNDS 35 MILLION (POUNDS 348 MILLION LESS

POUNDS 313 MILLION): AND CURRENTLY IS SUBSTANTIALLY MORE, VIZ:

AFTER ALLOWING FOR INTEREST CREDITS WE SHALL HAVE TO TOP UP BY

POUNDS 5 - 6 MILLION AT THE END OF NOVEMBER IN ORDER TO MAINTAIN

A POSITION FOR THE PURPOSES OF THE GUARANTEE OF POUNDS 313

MILLION. OBVIOUSLY, WE COULD NOT CONSIDER RESTORING OUR POSITION TO POUNDS 348 MILLION AND, THEREFORE, IN PARAGRAPH 3 OF OUR TELEGRAM 1317 WE GAVE YOU THE FIGURES WHICH WE CONSIDERED

SHOULD BE USED FOR THE PURPOSE OF CALCULATING OUR OPENING POSITION AS WELL AS BEING IN ACCORDANCE WITH PARAGRAPH 6(3)(B)

OF THE DECLARATION.

3. I SHOULD LIKE TO GO TO EXECUTIVE COUNCIL ON 4TH DECEMBER AND WOULD APPRECIATE, THEREFORE, A VERY EARLY REPLY SO THAT A MEMORANDUM

CAN BE FINALISED.

MACLEHOSE

ORWELL DISTRIBUTION

FRD HKIOD

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