TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 162

11.2.87

MONETARY ISSUES

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23.

I turn now to monetary issues. The better than

expected performance of the economy in 1986, and the lower

and declining interest rates over the year have led to a

general improvement in asset prices, most noticeably those

of financial assets. The stock market, for example, has

performed strongly, helped by the inflow of foreign

investment funds into Hong Kong to take advantage of the

potential returns available here.

24.

I am happy to report that the exchange rate has

continued to demonstrate remarkable stability, remaining

for most of the time within a narrow range against the US

dollar. There was, nevertheless, spasmodic speculation

based on unfounded rumours of a possible change in the

link.

25.

Although such speculative activity was short

lived, I reiterate that the Government has no intention of

tampering with the link. The linked exchange rate system

is a crucial element underlying the stability of our

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