CONFIDENTIAL
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external assets held in sterling. In July, as the end of the gurantee period on 30th. September began to approach, it became apparent that if the Hong Kong banks were not informed well in advance of what successor arrangements would be offered, they might decide to cover their open post-September 30th positions by selling forward, as they were legally entitled to do. In a difficult situation the Treasury were unable to provide this information, and, though the Hong Kong Government's own holdings were not touched, the banks sold forward a proportion of theirs. The Hong Kong Government eventually decided to participate in the arrangements offered under the Unilateral Guarantee, but the banks have shown no interest in doing so.
9.
By March we will have to agree on some continuing arrangement after the interim Unilateral Guarantee runs out, and it looks as if this will have to be negotiated in circum- stances of exceptional difficulty. The assets of banks are now excluded, so all that will be involved is the Government's own sterling holdings.
The Stock Exchanges.
The most newsworthy event of the year was the extraordinary rise and fall of the stock
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market.
CONFIDENTIAL
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