CONFIDENTIAL
CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1964
OF 15050OZ JUNE 89
INFO SAVING PEKING
이점
HKC0902TOP COPY
Q DIST?
10
013632
MDHIAN 9359
HONG KONG ECONOMY
THE FOLLOWING IS A NOTE
IN CONNECTION WITH LORD
DEBATE ON HONG KONG :
CONCERNING THE POINTS YOU ASKED ABOUT
GLENARTHUR'S CONTRIBUTION TO THE SHORT
A. THE STOCK AND MONEY MARKETS
1. SINCE THE LAST NORMAL TRADING DAY ON 18 MAY, THE HANG SENG INDEX HAS DROPPED FROM 3277 TO 2355 AS OF 13 JUNE, REPRESENTING A TOTAL LOSS OF SOME 922 POINTS OR 28 PER CENT. DURING THIS PERIOD, THE MOVEMENT OF THE INDEX HAS BEEN MARKED BY REPEATED JOLTS AS THE EVENTS IN CHINA UNFOLDED. MASSIVE SELL-OFFS OCCURRED IN THE WEEK OF
22 MAY FOLLOWING THE IMPOSITION OF MARTIAL LAW IN BEIJING. THIS
RESULTED IN A NEXT LOSS OF 379 POINTS IN THE HANG SENG INDEX. ON 5 JUNE, THE MARKET REACTED AGAIN FOLLOWING THE BEIJING CARNAGE WITH A LOSS OF 582 POINTS. IT IS DIFFICULT TO READ THE MARKET AT THIS TIME BECAUSE THE MOVEMENTS ARE LARGELY DICTATED BY THE CHANGING
POLITICAL SITUATION IN CHINA. HOWEVER, MARKET SENTIMENT SEEMS VERY BEARISH, AS REFLECTED IN HANG SENG INDEX FUTURES CONTRACTS BEING TRADED AT SUBSTANTIAL DISCOUNTS.
2. THE LINK OF THE HONG KONG DOLLAR TO THE US DOLLAR, BUTTRESSED RECENTLY BY MONETARY REFORM MEASURES, HAS ENABLED THE EXCHANGE RATE TO REMAIN STABLE, CLOSE TO THE FIXED LEVEL OF HKD 7.80 TO ONE US DOLLAR, THROUGHOUT THIS MOST DIFFICULT PERIOD. INTEREST RATES FIRMED UP SHARPLY BUT HAVE STARTED TO EASE OFF THIS WEEK. THEY ARE
NEVERTHELESS STILL MORE THAN ONE PER CENT HIGHER THAN THOSE FOR THE US DOLLAR.
B. THE ECONOMY
3. GIVEN THAT THE MAJOR EVENT IN CHINA'S CURRENT CRISIS OCCURRED ON
JUNE 4 AND THAT NEARLY ALL OF OUR ECONOMIC DATA IS PRODUCED ON A MONTHLY BASIS AFTER THE END OF THE MONTH TO WHICH IT REFERS, THERE IS, AS YET, NO ECONOMIC DATA RELATING TO THE PERIOD AFTER JUNE 4.
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CONFIDENTIAL
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