FINANCIAL AND MONETARY AFFAIRS
64
Hong Kong dollar M1, M2 and M3 rose by 24.8 per cent, 14.3 per cent and 13.7 per cent respectively in 1992. The corresponding increases for total M1, M2 and M3 were 21.1 per cent, 10.8 per cent and 9.5 per cent.
Hong Kong dollar loans recorded a growth of 12.2 per cent in 1992 while foreign currency loans increased by 9.0 per cent. Analysed by major categories, loans for use in Hong Kong (including those for trade financing) increased by 10.9 per cent. Reflecting measures announced by the government in November 1991 to cool down the overheated property market, growth in residential mortgage loans slowed down from 35.4 per cent in 1991 to 13.6 per cent in 1992. Moreover, banks generally maintained a tight credit policy on mortgage loans. In particular, the maximum loan-to-valuation ratio was kept at 70 per cent. The quarterly growth rate of these mortgage loans slowed down from 8.8 per cent in the second quarter in 1991 to an average of 4.0 per cent in the first two quarters of 1992. Loans for trade financing recorded a moderate decrease of 4.0 per cent during 1992. Loans to other major sectors, including wholesale and retail trades, building, construction, property development and investment, transport, manufacturing and financial concerns, all recorded some increases during the year.
Turning to the financial markets, the expansion in the government borrowing programme facilitated the further development of the local capital markets. The Exchange Fund Bills market was expanded in February 1991 to include 364-day bills and the - government bonds programme was first launched in November 1991. Both the bills and the government bonds were well received by the market with tenders invariably several times oversubscribed. The yields for the bills were around 20 to 60 basis points below the corresponding Hong Kong interbank offered rate at end 1992, depending on the maturity of the bills while the yields for the bonds were around 90 basis points above the corresponding US Treasury bonds. Daily turnover of the bills and bonds, taken together, in the secondary market averaged $8.2 billion, or 35 per cent of the total amount of bills and bonds outstanding, at $23.3 billion at end-1992.
New issue activity in respect of other debt instruments in 1992 remained relatively moderate as funds can be raised through the buoyant stock market. A total of 99 new issues of negotiable certificates of deposit were launched during 1992, of which 87 were denominated in Hong Kong dollars. Of these 87 issues, 66 were arranged on fixed-rate terms and the remaining 21 on floating-rate terms. At the end of 1992, the outstanding value of Hong Kong dollar-denominated negotiable certificates of deposit amounted to $26.9 billion, compared with $23.2 billion at end-1991; 52.3 per cent of them were held outside the local banking sector.
Of the six new issues of commercial paper and other debt instruments reported to the Securities and Futures Commission during 1992, five were denominated in Hong Kong dollars. Following a successful issue of US dollar bonds last year, the Asian Development Bank launched in May 1992 its first issue of Hong Kong dollar bonds, amounting to HK$500 million, which will mature in 1999. The Asian Development Bank launched another five-year Dragon bond issue in Hong Kong in October 1992 to raise US$300 million. These bonds are listed on the stock exchanges of Hong Kong, Singapore and Taipei. In August, the International Finance Corporation, a World Bank affiliate, also launched a maiden issue of five-year Hong Kong dollar bonds involving an issue size of HK$500 million.