TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 157

225

CYPHER CAT A PRIORITY GPS 250

FM FCO 261570Z

CONFIDENTIAL

ORWELL

CONFIDENTIAL

(214)

HKK 5/1

PA

2

27:

TO PRIORITY GOVERNOR HONG KONG TEL NO 1209 OF 26 NOVEMBER.1973

21 YOUR TELEGRAM NO. 1317. STERLING GUARANTEE.

1. ON THE VALUATION OF SECURITIES, WE ARE WILLING TO ACCEPT YOUR CONVENTIONAL METHOD OF VALUATION, WHICH FOLLOWS COLONIAL REGULATION 230, AS BEING EQUIVALENT TO A METHOD OF VALUATION BASED ON STATUTE. THE REVISED MSP OF 69 WAS CALCULATED ON THIS BASIS. THE PROBLEM DESCRIBED IN YOUR PARAGRAPHS 2 AND 3 WOULD

NOT THEREFORE APPEAR TO ARISE.

2. THE FACT THAT YOUR CONVENTIONAL BASIS OF VALUATION IS ACCEPTABLE

TO US PROBABLY MEANS ALSO THAT THE PROBLEM DESCRIEED IN YOUR

PARAGRAPH 4 IS LESS LIKELY TO ARISE. KUT WE ACCEPT THAT THERE

MAY DE OCCASIONS WHEN HONG KONG HAY FAIL TO MAINTAIN THE MINIMUM

STERLING HOLDING ON A PARTICULAR REPORTING DATE BECAUSE OF A

FALL IN THE MARKET PRICE OF GILTS. ACCORDINGLY, WE ARE PREPARED

TO AGREE THAT THE TERMS OF THE PRESENT GUARANTEE WILL NOT PE

ABROGATED IN THE CASE OF A PURELY ACCIDENTAL FAILURE TO SATISFY THE

PROVISIONS OF PARAGRAPH 3 OF THE DECLARATION AS A RESULT OF CHANGES

IN THE VALUE OF HOLDINGS OF SECURITIES ARISING FROM CHANCES IN

MARKET PRICES, PROVIDED THAT THOSE CONDITIONS ARE SATISFIED ON THE

DATE ON WHICH ADVICES ARE NEXT DUE AFTER THE ADVICE DATE ON WHICH

THE FAILURE OCCURRED.

3. AS FAR AS YOUR OWN PRESENTATION IS CONCERNED, WE WOULD BE

CONTENT FOR THIS TO BE HANDLED AS YOU CONSIDER APPROPRIATE AND

NECESSARY WITHIN THE FRAMEWORK OF YOUR PARAGRAPH 6.

4. ON OTHER ASPECTS OF PUBLICITY, WE HAVE ALREADY CABLED ON THE

MISCHIEVOUS PIECE IN THE GUARDIAN OF 14 NOVEMBER.

5. THE MATERIAL REQUESTED IN YOUR PARAGRAPH 9 WAS SENT BY PAYTON

TO OCKENDEN ON 15 NOVEMBER. THE FIGURES, WHICH SHOULD BE USED WITH CIRCUMSPECTION, ILLUSTRATE THAT HOLDERS OF RESERVES IN

STERLING HAVE BEEN PETTER OFF PETWEEN SEPTEMBER 1968 AND SEPTEMBER

1973 THAN THOSE WHO HAVE HELD US DOLLARS,

6. WE HOPE THAT YOU WILL NOW FEEL ABLE TO RECOMMEND PARTICIPATION

IN THE ARRANCEMENT TO THE EXECUTIVE COUNCIL.

DOUGLAS-HOME

ORWELL DISTRIBUTION

FRD

HKIOD

.. CONFIDENTIAL