Sessional_Paper_1892 — Page 471

His Excellency

467

No.

34 92

HONGKONG.

CORRESPONDENCE RESPECTING THE PROPOSED LOAN.

Laid before the Legislative Council by Command of His Excellency the Governor, on the 30th November, 1892,

SIR,

DOWNING STREET, LONDON,

20th October, 1892.

We have been furnished by the Secretary of State for the Colonies with a copy

of an extract from your despatch of the 6th September last asking to be furnished with a statement of the advantages of issuing Inscribed Stock instead of Debenture or other securities, and for information as to the rate at which we could probably issue such stock.

At

2. In compliance with this request I have the honour to state that the principal arguments in favour of the issue of Inscribed Stock are as follows:-

(a) Greater security to the holder. Debentures, being transferable by delivery, are frequently excluded from the scope of Trust invest- ments and are sometimes objected to by ordinary investors. the present time, when the reduction of the interest borne by the Imperial Funds and the enhancement in price of Corporation Stocks and of the leading Railway Securities is turning the atten- tion of Trustees very largely towards Colonial Government secu- rities, this consideration is of great importance.

(b) The ease, and at the same time, the safety with which transfers are effected in the Register, free of cost, a characteristic which makes Inscribed Stock specially acceptable to those who require to con- duct frequent financial operations on the basis of the security of the stock.

(c) The facilities for investing small sums, even to shillings and pence, instead of being limited, as in the case of Debentures, to multiples of £100. This facility attracts small investors and is especially useful in dealing with the investment of small and numerous dividends.

(d) The opportunity which the issue of successive instalments of stock

under identical conditions as regards rate of interest and date of redemption offers for building up a line of stock sufficiently large to be fairly marketable, a qualification which enhances the attractiveness of the stock to all classes of investors.

(e) The circumstance that Inscribed Stock has established itself so firmly in the Colonial Market that a Debenture issue would, under ordinary conditions, be expected to realise a fractionally lower price than stock.

3. As regards the rate at which we think it possible to issue Hongkong Inscribed Stock we should, in present circumstances, expect to obtain from 103 to 104 for a 4 per cent. stock having 50 years currency. At the same time we should seriously consider the advisability of issuing 33 per cent. stock of the same currency. If such a stock could be placed at from 93 to 95 the saving in interest, as compared with a 4 per cent. at 103, capitalised over the currency of the loan, would largely outweigh the loss on redemption of the stock at par, and, as affecting the future borrowings of the Colony and the terms on which debt conversions may be effected, the establishment of a stock on a 3 per cent. basis would be of immense advantage. I have the honour to be,

Sir,

Your obedient Servant,

Sir W. ROBINSON, K.C.M.G.,

HONGKONG.

M. F. OMMANNEY.