TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 151

04 JAN 1988

04 JAN 1988

CONFIDENTIAL

6

Mr McLaren

PS/Lord Glenarthur

Private Secretary

In ot Lar

com then.

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Hong Kong Department

4 January 1988

PS/PUS

Mr Gillmore

News Department

Economic Advisers

2 Stenray n Stató

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vi سی

HONG KONG STOCK EXCHANGE: INVESTIGATION BY ICAC

Ministers will wish to be kept up to date on the latest

developments on this subject.

1.

2.

I attach:

A

(i)

Hong Kong telno 11, which reports the outcome of the

operation;

B

(ii)

the ICAC press statements;

C

(iii)

the Hong Kong Government's press statement;

D

(iv)

3.

the record of the meeting of the Stock Exchange Committee on

2 January.

The Hong Kong Stock Exchange opened for business as normal on

Sharply 4 January. Share prices fell initially (in line with the substantial fall in Tokyo) but staged a late rally. It is clear

faul that the overriding cause of this was worry about the continuing decline of the US dollar. My judgement is that the ICAC arrests

have had only a marginal effect on trading confidence. However the longer term effects of the affair on international confidence is

Hong Kong as a major financial centre will still need to be

CONFIDENTIAL