TNAG-0449-FCO40-514-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 16

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TO ROUTINE FCO TELNO 1080 OF 01 NOVEMBER, 1974.

YOUR TELEGRAM NUMBER 579 OF 19TH JUNE:

STERLING GUARANTEE.

RECEIVED IN REGISTRY No. 51 12 NOV 1974

HKK 5/101

WE SENT OUR RETURNS TO THE BANK OF ENGLAND YESTERDAY GIVING END-SEPTEMBER FIGURES. OUR OFFICIAL STERLING HOLDINGS AT THAT DATE WERE POUNDS 285.3 MILLION, GIVING A MARGIN OF NO LESS THAN POUNDS 15 MILLION ABOVE MSH.

2. THE LATEST DETAILED GILT PRICES AVAILABLE TO US YESTERDAY, THE LAST DAY OF OCTOBER, WERE THOSE FOR FRIDAY 25TH OCTOBER IN

THE FOLLOWING DAY'S FINANCIAL TIMES. WE APPLIED. THESE PRICES

TO OUR HOLDINGS AS REPORTED IN THE LATEST ADVICES FROM THE BANK

OF ENGLAND (AS AT 22ND OCTOBER) AND THE CROWN AGENTS (AS AT 4TH OCTOBER), AND ARRIVED AT AN ESTIMATE OF POUNDS 272.7 MILLION FOR TOTAL OFFICAL STERLING HOLDINGS. THE REDUCTION IN THE FIGURE WAS ENTIRELY DUE TO THE FALL IN THE GILT-EDGED MARKET. WE DID NOT SWITCH OUT OF STERLING DURING THE WHOLE MONTH, OR PURCHASE GOLD OR FOREIGN EXCHANGE. WE CONSIDERED THAT THE REDUCED MARGIN OF POUNDS 2.5 MILLION ABOVE MSH WAS ADEQUATE TO COVER ANY LIKELY CHANGES WITHIN STERLING HOLDINGS BETWEEN THE DATES OF THE ADVICES

AND THE 25TH OCTOBER.

3. THE REUTER TAPE HAS REPORTED, IN GENERAL TERMS, FURTHER FALLS IN GILT PRICES SINCE 25TH OCTOBER, INCLUDING FALLS IN THE LONGER- DATED ISSUES OF ''UP TO HALF A POINT'' YESTERDAY. SO IT IS POSSIBLE THAT OUR OFFICIAL STERLING HOLDINGS WILL TURN CUT TO HAVE BEEN BELOW MSH AT THE CLOSE OF BUSINESS FOR OCTOBER. WE SHALL NOT BE ABLE TO

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