3.14
A change of sentiment, however, followed as it became obvious that the Hong Kong dollar was undervalued. The trade-weighted exchange rate index recovered significantly and stood at 73.8 at the end of June. This still represented a net depreciation of 7.2% during the first half, with the
import-weighted index and the export-weighted index showing a depreciation of 7.2% and 7.1% respectively. Against the US dollar, which had been strong against most other currencies,
the exchange rate of the Hong Kong dollar recovered to end the first half at $7.20 per US dollar, representing a depreciation of 9.5% during the first half, of which 3.2% occurred during the first quarter and 6.5% during the second quarter.
The securities and gold markets
3.15
In the first half of the year, the stock market was fairly volatile. Share prices rose markedly in the first four
months, recovering the ground lost in the last quarter of
1982. The Hang Seng Index rose from about 760 in early
January to 1 067 on 14 April. The rally was reportedly
brought about by overseas institutional buying and
encouragement from Wall Street's performance. However, a
large part of the gain was eroded in May and early June, with
the index falling back to 863 on 9 June. The retreat was
attributable in part to the depreciation of the exchange value of the Hong Kong dollar which coincided with overseas selling,
and in part to the three percentage points increase in interest rates during the second quarter. Signs of an upturn
in the Hong Kong economy were largely ignored. On the
recovery of the
the Hong Kong dollar, shares rebounded sharply during the rest of June. The Hang Seng Index stood at 964 on
30 June, having risen by 23% during the first half. Daily
turnover on the four exchanges fluctuated widely between $23.8 million and $490 million, with most of the activity occurring in February and March. Total turnover in the six months, at
$19,285 million, was 10.9% less than in the second half of
1982.
32
/3.16 Trading
1
1
+
A