Monetary Statistics for June 1998

According to statistics published today (July 30, 1998) by the Hong Kong Monetary Authority (HKMA), the repatriation of offshore deposits helped ease liquidity in the banking sector in June 1998. Table 1 gives a summary and comparisons with earlier months.

Deposits

Total deposits rose by 1.4% in June, reversing the declines in the previous two months. Hong Kong dollar deposits rose by 1.0%, while foreign currency deposits grew by 2.0%.

The increase in total deposits is largely attributed to the repatriation of funds into Hong Kong as a result of the 22 June announcement of the exemption of the profit tax on interest income derived from corporate deposits.

Of the HK$ deposits, time deposits rose by 3.7%, but demand and savings deposits fell by 1.9% and 7.1% respectively. Depositors were attracted by higher rates for time deposits offered by banks in mid-June, amidst the renewed volatility in the regional financial markets, in particular, the weakening of the Japanese yen. As foreign currency deposit rose slightly faster than that of HK$ deposits, the share of HK$ deposits to total deposits fell marginally to 57.5% at end-June compared with 57.7% at end-May.

Loans and advances

During the month, total loans and advances declined by 1.8%. Offshore loans remained on a downward trend, dropping by 3.5% in June. The decline was partly due to the valuation effect of a weaker yen. Meanwhile, domestic loans decreased slightly by 0.7% in June. Loans for trade financing contracted further by 0.4%, while other loans for use in Hong Kong dropped by 0.7%. As HK$ deposits rose but HK$ loans fell, the HK$ loan-to-deposit ratio decreased to 111.5% at end-June from 113.2% at end-May.

Quarterly analysis of loans for use in Hong Kong by major economic sector

During the second quarter, the contraction in domestic loans moderated to 0.2%, compared with a 1.2% contraction in the preceding quarter. Loan demand was generally weak along with the slackening economic activities, while banks remained cautious in lending. In line with weak retail sales, loans for wholesale and retail trades declined by 1.5% in the second quarter, having fallen by 4.1% in the first quarter. Likewise, lending to the manufacturing sector and loans for trade financing also declined, shrinking by 1.9% and 2.7% respectively. Amidst thin trading volume of the stock market, lending to stockbrokers fell by 19.6% and loans to financial concerns fell by 5.3% during the quarter.

Nevertheless, property-related loans, which account for about 40% of domestic loans, increased during the quarter. Loans for building, construction and property development and investment rose slightly by 0.4% in the June quarter, having fallen by 0.4% in the preceding quarter. Lending to purchase flats under Home Ownership Scheme and Private Sector Participation Scheme rose sharply by 11.8%, as a substantial number of these types of flats were completed during the quarter. Growth of mortgage loans for other residential properties slowed to 1.7%, compared with 2.2% in the preceding quarter. Meanwhile, loans to the transport sector grew by 3.7% during the quarter.

Money supply

During the month, money supply growth continued to slow. HK$M1 fell by 1.7% in June. Meanwhile, HK$M2 and HK$M3 were both up by 0.8%. In the twelve months to June, HK$M1 dropped by 17.0%, while HK$M2 and HK$M3 grew by 0.4% and 0.3% respectively.

Note to editor

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Hong Kong Monetary Authority

30 July 1998