6.2.87
SECRET
14
this particular relationship in the context of our very
Although in the last quarter of 1986, there
open economy.
has been a tendency for the cost of living of those in the
higher income brackets to increase faster, I do not think
that we need as yet be unduly concerned.
28.
Turning to banking and the securities market,
the latest fashion is what is described as
"securitisation". As with some other fashions, one is
left with the feeling that the wearer may be in danger of
being over-exposed. She needs adequate cover; otherwise
she may catch a cold. Now that the banking sector has
been nursed back to health, it too must take care to
maintain adequate capital cover; otherwise it too may
catch a cold. Securitisation of debts exposes financial
institutions to what is for them a new type of risk; a
risk that is characterised in particular by the
replacement of assets which are generally secured, by
unsecured paper assets; and the price of those paper
assets is very often highly sensitive to changes in
interest rates. Furthermore, in Hong Kong interest rates
do and will continue to change frequently under the linked
exchange rate system.
SECRET
No comments yet.
Private notes are available after approval.