Key Information

inSight
Speeches
Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Zeti Akhtar Aziz
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Carmen Chu
Alan Au
Press Releases
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
Speeches
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Others
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Others
Guidelines and Circulars
Guidelines
Circulars
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
515.5995

Press Releases

Record of Discussion of the Meeting of the Exchange Fund Advisory Committee Currency Board Sub-Committee held on 24 July 2009

(Approved for Issue by the Exchange Fund Advisory Committee on 30 July 2009)

Report on Currency Board Operations (31 March 2009 - 8 July 2009)

The Sub-Committee noted that the Hong Kong-dollar exchange rate against the US dollar had stayed close to the strong-side Convertibility Undertaking of 7.75 during the review period with the Convertibility Undertaking being triggered repeatedly between 1 April and 7 July 2009 and the Aggregate Balance expanding markedly as result. The inflow of funds partly reflected equity-related demand and increased IPO activity. The market value of outstanding Exchange Fund Bills and Notes had increased as a result of additional issuance of Exchange Fund Bills.

2. The Sub-Committee noted that the Monetary Base had expanded during the period from HK$570.72 billion to HK$718.65 billion, mainly reflecting the increases in the Aggregate Balance and outstanding Exchange Fund Bills and Notes. The Backing Ratio (the ratio of the Backing Assets to the Monetary Base) had declined from 108.16% to 106.14%. This was mainly an arithmetical effect resulting from the simultaneous increases in the Backing Assets and the Monetary Base. The Sub-Committee noted the possibility that the lower trigger level of 105% might be reached for the first time, resulting in a transfer of assets from the Investment Portfolio to the Backing Portfolio to restore the Backing Ratio to 107.5%.

3. The Sub-Committee noted that, in accordance with Currency Board Principles, changes in the Monetary Base had been fully matched by corresponding changes in foreign reserves.

4. The report on Currency Board operations for the period under review is at Annex A.

 

Monitoring of Risks and Vulnerabilities

5. The Sub-Committee noted that earlier optimism about recovery of the global economy had faded somewhat. In the US, while the pace of economic contraction had slowed, neither investment nor consumption had yet shown positive growth. In the EU sentiment indicators reflected stabilisation but the real economy continued to lag behind and, in Japan, industrial production and exports had rebounded in June but a strong recovery was not yet visible.

6. On the Mainland, fiscal and monetary stimulus had kept investment growth high and officials had made clear that expansionary fiscal and monetary policies would continue with. Credit conditions remained loose with new lending had reaching RMB 1.5 trillion in June. Rapid credit growth had led to some concerns about credit quality in the banking sector.

7. In Hong Kong, retail sales and business confidence indicators had shown signs of stabilising. Merchandise exports had risen in May for the first time in six months and the unemployment rate had levelled off at 5.3%. Inflation had remained virtually unchanged. There had been persistent inflows into the Hong Kong dollar and strong momentum in the equity and property markets.

8. The Sub-Committee also noted a special analysis of the potential risks to monetary stability of continued capital inflows and the possible reversal of such inflows, and policy measures to address them. The Sub-Committee agreed that should inflows continue, more Exchange Fund paper may be issued against the expanding Aggregate Balance, with the pace and the size of issuance determined in response to market demand. Such issuance was consistent with Currency Board principles. Should inflows continue to the extent that generates risks of asset price and consumer price inflation, non-monetary policies, such as prudential measures, may be deployed to mitigate the associated risks.

 

A Framework for Monitoring Capital Flows in Hong Kong

9. The Sub-Committee noted a paper discussing conceptual issues relating to the definition of capital flows and proposing a framework for organising data to enable judgements to be formed of the nature and scale of fund flows in Hong Kong. Clarity about the definition and measurement of such flows is essential given their importance to monetary and financial stability.

 

Financial Services Sector as a Driver of Productivity Growth in Hong Kong

10. The Sub-Committee noted a paper analysing the contribution of various sectors to labour-productivity growth in Hong Kong in recent years. The study found that overall gains were driven by strong growth in the financial-services sector. Although growth in labour productivity had recently slowed because of the global financial crisis, the study concluded there the potential for financial systems in Asia, and in particular the Mainland, to expand meant that Hong Kong had good prospects for further productivity growth.

For further enquiries, please contact:
Peggy Lo, Manager (Communications), at 2878 1687 or
Hing-fung Wong, Manager (Communications), at 2878 1802

Hong Kong Monetary Authority
6 August 2009

Last revision date: 1 August 2011
ABOUT THE HKMA
The HKMA
Tender Invitations
Careers@HKMA
Legislative Council Issues
Links
The HKMA Information Centre
KEY FUNCTIONS
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
PUBLICATIONS & RESEARCH
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
Research
MARKET DATA & STATISTICS
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
KEY INFORMATION
Press Releases
Speeches
Guidelines & Circulars
Forthcoming Events
inSight
OTHER INFORMATION
Information in Other Languages (Bahasa Indonesia, हिन्दी, नेपाली, ਪੰਜਾਬੀ, Tagalog, ไทย, اردو)
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery