TNAG-2027-FCO40-2889-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 23

CONFIDENTIAL

FM FCO

TO IMMEDIATE HONG KONG

TELNO 1514

OF 10174OZ AUGUST 90

CONFIDENTIAL

TOP COPY Q DIST?

PERSONAL FOR ACTING GOVERNOR FROM MARSDEN,

32

HKD

+2

052736

MDHOAN 4062

HKB 020/26

RECEIVER ⠀

14 AUC 1990

سکرین

OUR TELNO 1499 AND YOUR TELNO 2471: FREEZING OF KUWAITI/IRAQI ASSETS: HENRY KESWICK

1. THE SECRETARY OF STATE HAS DECIDED THAT THERE SHOULD BE A QUICK MINISTERIAL RESPONSE TO HENRY KESWICK'S LATEST COMPLAINTS REFERRED TO IN FIRST TUR IN ORDER TO TRY TO DISCOURAGE HIM FROM REPEATING THEM MORE WIDELY. KESWICK'S COMPLAINTS ARE THAT:

(A) THE HONG KONG GOVERNMENT HAD NOT TAKEN IMMEDIATE ACTION TO FREEZE KUWAITI ASSETS. THIS DELAY HAD CONTRIBUTED TO THE RELATIVELY SHARP FALL IN SHARE PRICES IN HONG KONG COMPARED TO OTHER MARKETS. LOCAL FINANCIAL INSTITUTIONS HAD BEEN

UNCERTAIN WHAT TO DO BECAUSE THEY HAD SIMPLY BEEN

ADVISED TO USE THEIR COMMERCIAL JUDGEMENT.

(B) DESPITE THE SHARP FALL IN HONG KONG SHARE PRICES, TO WHICH HE IMPLIED THE HONG KONG GOVERNMENT HAD CONTRIBUTED, THE HKG HAD SHOWN NO FLEXIBILITY OVER EXTRATERRITORIALITY (A FAMILIAR THEME). NON-HONG KONG DOMICILED COMPANIES LIKE JARDINES HAD SUFFERED BECAUSE THEY HAD BEEN PREVENTED BY THE LISTING REQUIREMENTS OF THE HONG KONG STOCK EXCHANGE FROM BUYING BACK THEIR OWN SHARES.

3.

WE PROPOSE TO DRAW ON THE HELPFUL MATERIAL IN SECOND TUR

POINTING OUT THAT:

THE FALL IN SHARE PRICES IN HONG KONG LAST MONDAY WAS NOT OUT

OF LINE WITH THAT IN OTHER MARKETS OF A SIMILAR SIZE

-

TURNOVER ON THAT DAY WAS NOT EXCEPTIONAL AND IN FACT LOWER THAN ON 7 AND 8 AUGUST

-

THE FALL IN SHARE PRICES WAS NOT SURPRISING GIVEN THE RELATIVELY HIGH LEVEL OF SHARE PRICES OVER THE LAST 2-3 MONTHS (WHICH WAS IN ANY CASE DUE FOR CORRECTION) AND THE MARKET'S

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CONFIDENTIAL