VZCZCXRO1084
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHHK #2084/01 3191149
ZNR UUUUU ZZH
R 141149Z NOV 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 6237
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 HONG KONG 002084 
 
SIPDIS 
 
STATE FOR EAP/CM AND EEB/OMA, TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD HK CH
SUBJECT:  CORRECTED COPY: Hong Kong Officials Join G20 Meeting As 
Economy Slows 
 
¶1. Summary: Hong Kong officials arrived in the U.S. to participate 
in G20 meetings as part of the Chinese delegation as the local 
economy continued to slow.  Layoffs loom as economic difficulties in 
Macau threaten Hong Kong workers as well.  Hong Kong's Legco 
approved a measure to investigate bank actions related to the sale 
of Lehman minibonds over the government's opposition.  The Hang Seng 
Index fell 4.9 percent for the week but was up moderately in weak 
Friday trading.  Demand for Hong Kong dollars forced the HKMA to 
continue to sell foreign exchange and HIBOR remained relatively low, 
allowing big Hong Kong banks cut their prime lending rates by 25 
basis points.  End Summary. 
 
Hong Kong Joins G20 Meeting as Economy tips into Recession 
 
¶2.  Financial Secretary John Tsang and Hong Kong Monetary Authority 
Chief Executive Joseph Yam arrived in Washington November 13 to join 
the Chinese delegation attending the G20 summit.  Tsang told the 
local press that the global financial crisis would prevent Hong Kong 
from achieving expected 4-5 percent GDP growth in 2008.  Late on 
Friday afternoon, Government Economist Helen Chan announced that 
Hong Kong's third quarter GDP growth slowed to 1.7 percent from a 
year ago, compared with growth of 7.3 percent in the first quarter 
and 4.2 percent in the second quarter.  On a seasonally adjusted 
basis, Hong Kong's Q3 GDP shrank 0.5%.  Chan noted that the global 
financial crisis had significantly impacted Hong Kong's third 
quarter export trade, consumption and investment.  With 4.3 percent 
growth through the first three quarters, the Hong Kong government 
now hopes to see 3.0-3.5 percent GDP growth for 2008. 
 
What Happens in Macau Doesn't Stay in Macau 
 
¶3.  Las Vegas Sands (LVS) Corporation confirmed November 13 that at 
least 4,000 Hong Kong construction workers would be among 9,000 
workers laid off as the company suspends uncompleted projects in 
Macau.  Apple Daily (Nov. 14) said the return of these 4,000 workers 
to Hong Kong would push up the unemployment rate by 0.1 percentage 
point.  The same report speculated that a continued slowdown in 
Macau could threaten the jobs of another 20,000 Hong Kong workers in 
Macau's hotel and construction industries. 
 
¶4.  Hong Kong Chief Secretary Henry Tang blamed LVS' problems on 
"the global financial tsunami," and promised that the Hong Kong 
government would look for ways to speed up its infrastructure 
projects to create more jobs. This week, CE Donald Tsang and CS 
Henry Tang made separate visits to Dongguan and Shenzhen to hear the 
concerns of Hong Kong-owned factories in the Pearl River Delta. 
Shenzhen officials reportedly promised to guarantee some payments 
and reduce labor restrictions to help Hong Kong companies there. 
 
Legco to Probe Banks on Lehman Bros' Minibonds 
 
¶5.  On November 12, Legco passed a resolution authorizing a select 
committee to investigate bank policies, procedures and actions 
related to the sale of Lehman Bros'-issued minibonds to retail 
investors.  The government and banks came out strongly against the 
resolution in the days and weeks leading up to the vote, warning 
that exercising the "Powers and Privileges" clause of the Basic Law 
to subpoena bank executives and records could damage Hong Kong's 
standing as an international financial center.  Despite the 
government's concerns, Legco passed the resolution by a sizeable 
majority.  The subcommittee will meet November 24 to discuss how the 
investigation will proceed and is expected to probe whether the HKMA 
and SFC properly supervised banks, how banks trained sales staff, 
and the roles of senior government officials and banking executives 
in the approval of these instruments for sale. 
 
4 Trillion RMB Can't Stem Hang Seng Slide 
 
¶6.  Bank of China International Research Vice President Bai Ren told 
the Hong Kong press that China's RMB 4 trillion market stimulus 
package announced November 9 would have only a short-term effect on 
the stock market.  After trading moderately higher on November 10, 
the market lost ground throughout the week.  The Hang Seng Index 
gained 321 points on Friday or 2.4 percent to close at 13542.66. 
Daily trade was a meager HKD 45 billion.  For the week, the Hang 
Seng Index was down 4.9 percent or 700.77 points. 
 
¶7.  The Hong Kong dollar remained strong this week, standing at the 
higher end of HKD 7.75/USD.  HKMA continued to sell Hong Kong 
dollars in the interbank market to meet the demand.  HKMA Chief 
Executive Joseph Yam said in his weekly column on November 13 that 
"strong demand for Hong Kong dollars was probably due to 
repatriation of funds and unwinding of interest carry trades as 
global financial jitters led market participants to de-leverage and 
reduce their exposure to risk".  Yam predicted that interest rate 
volatility would continue. 
 
 
HONG KONG 00002084  002 OF 002 
 
 
Banks Lower Rates, Any Takers? 
 
¶8.  HIBOR quoted by Hang Seng Bank today was 0.3 percent for 
overnight, 0.4 percent for 1-W, 1.10 percent for 1-M, 2.2 percent 
for 3-M and 2.5 percent for 6-M.  Local banking giants HSBC and 
Standard Chartered announced they would cut their prime lending rate 
by 25 basis points to 5 percent; the lowest level since 2004.  They 
were followed by Bank of East Asia and Hang Seng Bank.  Analysts 
predicted the cuts would do little to stimulate mortgage lending in 
Hong Kong as property prices continue to slide.