RESTRICTED
39
156300
MDHIAN 7643
RESTRICTED
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1845
OF 05110OZ JUNE 89
100/1
HKC 100
INFO IMMEDIATE WASHINGTON, PEKING
TOP COPY Q DIST ?
STATE OF HONG KONG MARKET 5 JUNE 1989
SUMMARY
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·
THE HANG SENG INDEX PLUNGED 582 POINTS TODAY ON MODERATE
TURNOVER. THE HONG KONG DOLLAR EXCHANGE RATE STRENGTHENED TO ABOUT 7.785 AND THE INTEREST RATES FIRMED TO OVER 12 PER CENT.
DETAILS
2. IN RESPONSE TO THE WEEKEND BLOODSHED IN BEIJING, THE HANG SENG INDEX FELL BY A MASSIVE 422 POINTS IN THE FIRST HALF HOUR
OF TRADING. THE INDEX CONTINUED TO PLUNGE FOR THE REST OF THE MORNING AND CLOSED AT 2085, WITH A LOSS OF 590 POINTS. IN THE AFTERNOON, THE INDEX FELL INITIALLY AND REBOUNDED SLIGHTLY RIGHT BEFORE CLOSING TO CLOSE AT 2093. THE TOTAL LOSS FOR THE DAY WAS
582 POINTS WITH A TURNOVER OF HKD 2.25 BILLION.
3. THE FALL IN THE HANG SENG INDEX IS A DIRECT RESPONSE TO THE WEEKEND CARNAGE IN BEIJING. DESPITE THE FALL, THE STOCK MARKET SURVIVED IN A RELATIVELY GOOD SHAPE. SIGNIFICANT REBOUND IS NOT
EXPECTED UNTIL THE POLITICAL UNCERTAINTIES ARE CLEAR. SINCE THE LAST NORMAL TRADING DAY ON 18 MAY, THE INDEX HAS NOW FALLEN BY 1182 POINTS, REPRESENTING A TOTAL LOSS OF 30 PER CENT.
4. TRADING IN THE HANG SENG INDEX FUTURES MARKET INCREASED SIGNIFICANTLY. A TOTAL OF 3053 CONTRACTS WERE TRADED. THE JUNE
CONTRACT CLOSED AT 2010 WITH AN 85 POINT DISCOUNT TO THE SPOT MARKET. DUE TO A LIMIT DOWN OF AUGUST CONTRACTS IN THE MORNING, ONLY 223 CONTRACTS WERE TRADED. THERE WERE TWO MARGIN CALLS DURING THE DAY AND THEY WERE FULLY MET. THERE WAS NO TRADING IN THE
OCTOBER AND THE DECEMBER CONTRACTS.
5. THE EXCHANGE RATE OPENED THIS MORNING CLOSE TO THE LINKED RATE OF 7.80 WITH A WIDESPREAD BETWEEN BUYING AND SELLING RATES. HOWEVER, CONCERN OVER A SHORTAGE OF LIQUIDITY PROMPTED BANKS TO SELL US
DOLLARS FOR HONG KONG DOLLARS. THE EXCHANGE RATE CONSEQUENTLY STRENGTHENED AND STABLISED AT ABOUT 7.785 FOR THE REST OF THE DAY
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