HRBONG 20
CONFIDENTIAL
104
056331
MDHIAN 1227
CONFIDENTIAL
FM BTC HONG KONG
TO DESKBY 29083OZ FCO
TELNO 285
OF 290515Z JUNE 89
INFO IMMEDIATE PEKING, HONG KONG
83
TOP COPY u DIST ?
MIPT • HONG KONG : THE COMMERCIAL AND ECONOMIC CLIMATE IN LIGHT OF RECENT EVENTS IN CHINA, WITH PARTICULAR REFERENCE TO PROSPECTS FOR BRITISH BUSINESS
1 BRITAIN'S STAKE IN THE HONG KONG ECONOMY IS CONSIDERABLE. OFFICIAL FIGURES PUT THE UK'S EXPORTS TO HONG KONG AT POUNDS STERLING 1 BILLION AND INVISIBLE EARNINGS AT ABOUT THE SAME, AND THESE HAVE BEEN GROWING: OUR EXPORTS IN APRIL THIS YEAR WERE UP 22 PERCENT ON
THOSE OF APRIL 1988. THE REAL FIGURES OF THE VALUE OF THIS TRADE TO BRITAIN ARE CERTAINLY CONSIDERABLY HIGHER STILL. UK INVESTMENT IN HONG KONG HAS RECENTLY BEEN CALCULATED AT POUNDS STERLING 19 BILLION. HOW FAR WILL RECENT EVENTS PUT THIS AT RISK? IT IS TO0
EARLY TO SAY. BUT MANY OVERSEAS INVESTORS AND TRADERS IN HONG KONG ARE LOOKING CLOSELY AT THE LIKELY IMPACT.
THE IMMEDIATE IMPACT ON THE ECONOMY OF HONG KONG HAS BEEN SIGNIFICANT BUT NOT, DRAMATIC. THE STOCK EXCHANGE, THE HANG SENG INDEX, LOST 22 PERCENT ON 5 JUNE AND WAS NEARLY 40 PERCENT DOWN ON ITS HIGH OF 15 MAY. IT IS STILL DOWN. THREE MAJOR RIGHTS ISSUES, PREPARED FOR THE MARKET SINCE 4 JUNE, HAVE BEEN CANCELLED, AND IT SEEMS UNLIKELY THAT THERE WILL BE SIGNIFICANT NEW ATTEMPTS TO RAISE FUNDS WHILE PRESENT UNCERTAINTIES LAST. PROPERTY SALES, ALTHOUGH NOT IT SEEMS RENTALS, ARE AT A STANDSTILL. PEOPLE REASSURE EACH OTHER THAT THIS WILL REMOVE OVER-HEATING IN THE MARKET WHERE PRICES ARE NOW CHALLENGING TOKYO AS THE HIGHEST IN THE WORLD, BUT SINCE SO MUCH OF THE FINANCIAL SCENE IN HONG KONG IS PROPERTY RELATED, ANY COLLAPSE IN THIS SECTOR WOULD HAVE MAJOR KNOCK ON EFFECTS. COMPANIES, INCLUDING SOME BIG ONES, ARE CONTINUING TO REMOVE THEIR REGISTRATION TO BERMUDA AND THE CAYMAN ISLANDS. JARDINES GOT ALL THE PUBLICITY, BUT THERE IS A STEADY FLOW OF OTHERS. BUT NOT IT SEEMS A PANIC. THE SEARCH FOR FOREIGN PASSPORTS AND THE RESULTING BRAIN DRAIN, ADDED TO AN ALREADY TIGHT LABOUR MARKET, IS CAUSING DIFFICULTIES, ESPECIALLY AT MANAGEMENT LEVEL, AND THERE IS LITTLE DOUBT THAT CURRENT EVENTS WILL INTENSIFY THIS (THE ECONOMIC AND COMMERCIAL IMPLICATIONS OF A REALLY MAJOR EXODUS, IN THE EVENT OF AN ARMAGEDDON SCENARIO, AND/OR A WIDESPREAD ISSUE OF PASSPORTS
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