TNAG-1230-FCO40-1543-Visit-by-Richard-Luce--Minister-of-State-for-Foreign-and-Com-1983 — Page 20

CONFIDENTIAL

KONG'S CONCERN BUT I FEEL FIRMLY IN THE SADDLE.

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HONG KONG STOCK MARKET AND EXCHANGE RATE FLUCTUATIONS: 28.

SHARP FLUCTUATIONS IN THE HANG SENG INDEX ARE MORE COMMON

THAN IN WESTERN STOCK EXCHANGES. IN 1973 THE INDEX FELL FROM

1700 TO LITTLE MORE THAN 200. OF COURSE UNCERTAINTY OVER THE

FUTURE FROM TIME TO TIME AFFECTS THE MARKET BUT THERE ARE OTHER

FACTORS SUCH AS THE WORLD RECESSION, REDUCED GROWTH FORECASTS,

DECLINING PROPERTY PRICES, HIGH INTERNATIONAL INTEREST RATES AND

THE STRENGTH OF THE US DOLLAR DOLLAR AFFECT THE MARKET.

:

DECLINING CONFIDENCE IN HONG KONG:

29. I KNOW THERE IS GENUINE CONCERN HERE REFLECTED IN THE STOCK

MARKETS AND THE EXCHANGE RATE, ABOUT WHAT THE FUTURE HOLDS IN

STORE. THAT IS UNDERSTANDABLE AND WE ARE VERY CONSCIOUS OF THIS

IN LONDON. BUT THERE IS AN UNDERLYING STRENGTH IN THE HONG KONG

ECONOMY WHICH IS REFLECTED IN INDICATORS SUCH AS EXPORT

PERFORMANCE AND FULL ORDER BOOKS.

BRITISH SELL-OUT:

30. THIS SORT OF TALK IS HARMFUL AND UNTRUE. I WOULD LIKE TO

SAY THIS TO THE HONG KONG PEOPLE: WE HAVE BEEN TRYING THROUGH THE

TALKS TO OBTAIN THE BEST POSSIBLE DEAL FOR HONG KONG WHICH WILL

PRESERVE ITS PROSPERITY AND STABILITY. WE WILL CONTINUE TO DO

SO. WE ARE UNWAVERING AND UNITED IN OUR AIM TO SEEK A SETTLEMENT

WHICH WILL BE ACCEPTABLE NOT ONLY TO BRITAIN AND CHINA BUT ALSO

TO HONG KONG.

MR HEATH'S VISIT TO CHINA:

31.

THIS WAS A ENTIRELY PRIVATE VISIT. HE CARRIED NO OFFICIAL

MESSAGE TO OR FROM THE CHINESE.

MR HEATH'S EXCHANGE WITH EXCO:

32.

THERE WAS A MEETING BETWEEN MR HEATH AND EXCO MEMBERS. THIS

WAS AN ENTIRELY PRIVATE AFFAIR.

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CONFIDENTIAL