XN000022-1979-02-02 — Page 2

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FRIDAY, FEBRUARY 2, 1979

MONEY SUPPLY FIGURES FOR DECEMBER

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THE BANKING AND MONEY SUPPLY STATISTICS FOR DECEMBER AND QUARTERLY ANALYSIS OF BANK LOANS AND ADVANCES WERE RELEASED TODAY (FRIDAY) BY GOVERNMENT.

THE MONEY SUPPLY ON BOTH DEFINITIONS ROSE IN DECEMBER BUT, AFTER ALLOWING FOR SEASONAL INFLUENCES, IT IS APPARENT THAT THE LONGER TERM RATE OF GROWTH IS CONTINUING TO SLOW DOWN.

FOUR MORE LICENSED BANKS BEGAN TO OPERATE IN DECEMBER, BUT THEIR RESULTS ARE UNLIKELY TO HAVE HAD ANY SUBSTANTIAL EFFECT ON THE FIGURES.

M1 (NOTES AND COINS IN CIRCULATION AND DEMAND DEPOSITS AT LICENSED BANKS) ROSE BY $1,323 MILLION (6.3 PER CENT) IN DECEMBER TO $22,281 MILLION, WHICH WAS 23.2 PER CENT ABOVE DECEMBER, 1977.

M2 (M1 PLUS TIME DEPOSITS AND SAVINGS DEPOSITS) ROSE BY $1,916 MILLION (2.7 PER CENT) IN DECEMBER TO $73,406 MILLION, WHICH WAS 25.6 PER CENT ABOVE DECEMBER, 1977.

THE RELATIVELY SHARP MONTHLY INCREASE IN M1 REFLECTS A SEASONAL EXPANSION OF THE NOTE CIRCULATION AND ALSO A VERY SUBSTANTIAL RISE IN DEMAND DEPOSITS, WHICH MAY ALSO BE DUE TO SEASONAL FACTORS.

THE ANNUAL GROWTH RATE OF M2 (WHICH AT THIS TIME OF YEAR IS PROBABLY THE BETTER INDICATOR OF UNDERLYING TRENDS) HAS NOW FALLEN FOR THREE MONTHS FROM ITS PEAK RATE OF INCREASE OF 30.3 PER CENT IN SEPTEMBER, 1978, COMPARED WITH SEPTEMBER, 1977.

COMPARING THE AVERAGE LEVEL OF M1 AND M2 IN THE OCTOBER TO DECEMBER 1978 PERIOD WITH THE SAME PERIOD IN 1977, TO SMOOTH OUT UNUSUAL MONTHLY FLUCTUATIONS, M1 SHOWS AN INCREASE OF 23.0 PER CENT AND M2 AN INCREASE OF 26.7 PER CENT.

ON THIS COMPARISON THE GROWTH RATE OF BOTH MEASURES HAS FALLEN FOR TWO MONTHS.

LOANS AND ADVANCES IN HONG KONG CONTINUED TO INCREASE IN DECEMBER, WITH THE TOTAL OUTSTANDING RISING DURING THE MONTH BY $1,928 MILLION (3.8 PER CENT) TO 352,814 MILLION, WHICH WAS 43.3 PER CENT ABOVE THE LEVEL AT THE END OF DECEMBER, 1977.

THIS RATE OF GROWTH CONTINUES THE TREND OF THE SECOND HALF OF 1978, WITH THE INCREASE IN LOANS AND ADVANCES, ON AN ANNUAL COMPARISON, ACCELERATING EACH MONTH FROM JUNE, 1972.

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