JWL0092
Story
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HONG KONG FINANCIAL MARKETS: JUNE 1992.
38
9.7.92
• HK$ strengthened against the US$ from 7.74 to 7.73
• Prime Rate was left unchanged at 7% in June, but cut to 6.5% on 3 July (wef 8 July)
• HIBOR hovered between 3.4% and 3.6%, 30-50 bp below a US$-LIBOR of 3.85% to 4%
•
HangSeng Index fluctuated (down 4.4% then up 6%) to new high of 6,135 on 1 July
HK$ strengthened from 7.74 to 7.73, thus further widening the deviation from the link rate of 7.80 to 0.9%. This has been partly because of improved trade performance, and more importantly because of continued foreign interest in the local stock market. The Unit Trust Association praised HK equity funds for giving an average of 70.2% y-o-y return and a survey of US businessmen showing record high confidence in HK. But Morgan Stanley downgraded HK from 10% of their global portfolio to just 3.5%.
Interest rates remained stable, but low, following May's cuts in prime rate and fall in HIBOR to below US$-LIBOR- but this does not appear to have weakened the HK$.
HangSeng Index fluctuated: it fell initially by 4.4% (from 1 to 18 June), but bounced back by 6% to a new high of 6,135 on 1 July - 64% higher than a year earlier. The volatility was blamed on HSBC share-price fluctuations, and on growing trade in derivatives (including Hang Seng Index and HSBC share derivatives)
HSBC Share price fell in early June from HK$48 to HK$44 on news of HSBC's exposure to 0&Y, but rebounded later to HK$48 as Midland shareholders began accepting HSBC's bid.
Liquidity Adjustment Facility discount window was opened on 8 June. The initial rates were set at 2.5% bid and 4.5% offer, compared with the overnight interbank rate of 3.3%. The LAF is designed to help banks with temporary liquidity difficulties.
New Electronic Stock Settlement System was launched in late June to cope with recent increases in trading volume. It will gradually begin handling selected blue chip shares, but can eventually provide automatic matching of buyers and sellers and simultaneous reporting of deals. Currently brokers have 15 minutes to report a deal.
ECONOMIC INDICATORS
· CPI(A) inflation fell to 8.8% in May from 8.9% in April along with other inflation indicators. This was unexpected, as the low inflation in April had been seen widely as a seasonal quirk.
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Re-exports rose 27% y-o-y to HK$57 bn in May, while domestic exports declined 0.1% to HK$19 bn.
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Imports rose 21% y-o-y to HK$82 bn ́in May, giving a monthly visible trade deficit of just HK$5 bn.
•
Unemployment rose to 2.5% in February- April Quarter, from 2.1% a year earlier.
*
Copies to Mr Crockett, Mr T A Clark, Mr Latter, Mr Page, Mr Elston, Mr Smeeton, Mr Sutherland,
Mr D A Ware, Mr Miles, Mr Milne, Mr A Bulley, ID Sections 6 9, BSD Group 18;
Mr Ricketts (FCO), Mr Cox (FCO), Mr Lane (FCO), Mr MacIntyre (HMT).
A monthly note from Developing World Division HO-3, Middle & Far East
Jakob Hand W Lund (4483)