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Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: ---------- who wrote (928)	11/25/1997 1:46:00 AM
From: Tom	Read Replies (1) \| Respond to of 2951

Doug: If I may... Japan (BOJ / MOF) could also borrow from The Fed, using their U.S. Treasuries as collateral. It would be a bit less sensational and, therefor I believe, desirable. Japan's private institutions? Yes. They would probably sell into the marketplace from the outset. In any event, your concerns are well-founded. Tom

To: ---------- who wrote (928)	11/25/1997 5:03:00 AM
From: Richard Tsang	Read Replies (1) \| Respond to of 2951

Doug, I for one am also in favor of a delink and believe there is potential for the HK$ to appreciate if the peg is broken. However, for a sustained increase in value of any currency, forex reserve alone is not enough. They didn't do a good job in controlling inflation which has been 4-6 points higher than the US (whose currency the HK$ is pegged) almost every year since the peg in 1983. I recall the HK$ appreciated from 6.06 in the early 70's of fixed exchage rates to its high of 4.80 to the dollar since the currency was floated until the crisis in 1983, and the peg at 7.80. Those appreciation was fueled by industrial export and year-on-year productivity increase, which more than offset inflation. With the switch from manufacturing to service as their core output, the cost of providing service at very high levels and continued higher inflation (than the US), I am much less optimistic now! RT