TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 121

.29 HKEAO NEW YORK.

Appendix B

COMMENTARY ON HONG KONG'S IMAGE

Prepared by Richard Fursland Gavin Anderson & Co

25th November 1987

Recent developments have not created new negative elements in U.S. perceptions but have reinforced long-standing negative elements in U.S. perceptions. This makes the problem harder to resolve it will not "go away" as memories of "Black Monday" recede and will not be resolved simply by measures to avoid a recurrence of the markets' closure.

2. The U.S. business and financial community have a high regard for Hong Kong as a business centre, for the ingenuity and industriousness of the Hong Kong people and for the general management style of the Hong Kong Government.

3.

In particular, U.S. financial institutions value Hong Kong as a financial market for certain specific purposes, including the opportunity to make money quickly there for themselves and for their clients.

4. But the level and extent of financial institutions' interest in Hong Kong is much lower than their interest in the London and Tokyo markets. Ine turnout ot some 20 senior financial executives for the breakfast and lunch arranged for the AG in New York and Boston in November represented well over half of the financial executives here with a major interest in the Hong Kong market.

5. In addition, the U.S. financial community has held long-standing concerns about the regulation of the Hong Kong markets. These concerns are illustrated by the frequent use of the term "cowboy" by senior financial executives in referring to these markets.

6.

Finally, there are considerable concerns in the U.S. financial community about the continuing vitality and viability of Hong Kong as a financial centre in the 1990s, which have an impact on their current level of interest in and commitment to Hong Kong.

7. Recent developments, particularly the closure of the markets and the problems of the Futures Exchange, reinforced the negative elements in U.S. perceptions of Hong Kong, and partic

ally Ü.5. concerns about the regulation of its markets. 8. A senior executive from one of three major U.S. investment banks recently asked me: "How can you expect us to take seriously a market which closes for four days?"

closes for four days?" The senior portfolio managers of the major Boston-based mutual funds who met AG made very clear that they did not accept the "settlement backlog" explanation for the markets initial closure.

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