TNAG-0623-FCO40-771-Hong-Kong-Government-investments-in-South-African-stocks-1977 — Page 14

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criticism as in Hong Kong's case, when it has been done without the knowledge of the government of the

dependent territory concerned. Financial Relations Department have undertaken to look into the wider implications that arise from what has happened in Hong Kong's case and to advise further.

5. In considering Mr Stewart's submission, Lord Goronwy

Roberts said that he would like to have an estimate of

the total of Hong Kong's reserven, along with a general picture of their location as diversification from sterling has proceeded. The Hong Kong Government began to diversify out of sterling in 1972 and I attach a table, prepared by the Economists Department, which gives an analysis of their overseas investments at the beginning of 1976 (no more recent figures are yet available). I should point out that investments in a particular country may not be in the currency of that country since Euro-marke bonds are issued in mixed currencies. It will be seen that

at the beginning of 1976, sterling still represented the largest currency held by the Hong Kong Government (37%). However, the Hong Kong Government's policy since August 197 has been to reduce the sterling component of the Exchange Fund's assets to around 30% and further diversification wi have taken place during last year. (Forty percent of the assets are to be kept in US dollars and 30% in other

The Treasury and the Bank of extent of the Hong Kong Government

Hong Kong young pattern e

nominated currencies.)

England are aware of the

mvestment

i sterling

Governmenlle nuange investmente and have raised no objections. Moreover, it is HMG's current policy to run

down sterling balances in an orderly manner the Treasury

have already made initial approaches to the Hong Kong

dawny (haks,

Government to this end.

6. I recommend that we should take note of the position with regard to the Hong Kong Government's investments in South African stocks and the position witİT TEKard-be

sterling, but that the question of the Crown Agents' role

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