TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 56

XCCI (88) 72

Public Reaction

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Page

4

Some sections of the public may query the wisdom of the Government concession and raise questions about when the Government loan extended under the Lifeboat will be completely repaid. The better-informed, especially those in the financial sector, are likely

likely to welcome the restructuring package as a genuine effort by the Government to help the reconstitution of the HKFE and hence continuation of a

a sound futures market in Hong Kong.

Publicity

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A joint press release will be issued by the parties concerned, namely, Government, the HKFGC and the HKFE announcing the restructuring package. The release will emphasize that, under the package, the Government's contingent liability will be reduced substantially as a result of the crystallisation of the credit facilities. In return and in an effort to assist the reconstitution of the HKFE and the recapitalization of the new clearing house, the Government has agreed to suspend the LIFO principle for $200 million. This will enable the broker-lenders to contribute towards the HKFE's members' fund (which will be built up to $100 million) and the broker-lenders and shareholder-lenders to increase the capitalization of their futures subsidiaries, where applicable, to an adequate level.

29 September 1988

(L/M 67/88 to C9/33/3C (88) III)

COUNCIL CHAMBER