XN000022-1983-02-23 — Page 10

WEDNESDAY, FEBRUARY 23, 1983

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THE FALL IN PROPERTY AND LAND PRICES CREATED PERSISTENT UNEASE IN THE FINANCIAL SECTOR, MR BREMRIDGE SAID.

TOWARDS THE END OF THE YEAR, A FEW REGISTERED DEPOSIT-TAKING COMPANIES EXPERIENCED LIQUIDITY PROBLEMS.

THERE HAD BEEN CLAIMS THAT FURTHER ADJUSTMENTS IN 1982 UNDER THE THREE-TIER SYSTEM REQUIRING REGISTERED DTC'S TO RUN DOWN THEIR SHORT-TERM DEPOSITS IN TWO STAGES BY THE END OF JUNE THIS YEAR EXACERBATED THESE PROBLEMS, MR BREMRIDGE NOTED.

BUT HE SAID THAT HE DID NOT BELIEVE THAT THIS FACTOR WAS CRITICAL.

+MOREOVER I AM SURE THAT WHEN THE ADJUSTMENT IS OVER AND THE DUST IS SETTLED WE SHALL END UP WITH A STRUCTURE WHICH PROVIDES BOTH BETTER PROTECTION FOR DEPOSITORS AND A SOUNDER BANKING SYSTEM,+ HE SAID.

ON CAPITAL MOVEMENT, MR BREMRIDGE POINTED OUT THAT STATISTICS OF THE GROWTH OF TOTAL DEPOSITS IN ALL CURRENCIES HERE LAST YEAR SUGGESTED THAT THERE WAS A SUBSTANTIAL INFLOW OF MONEY INTO HONG KONG RATHER THAN AN OUTFLOW.

HE SAID THAT ON THE OTHER HAND, INVESTMENT BY HONG KONG PEOPLE ABROAD HAD CONTINUED, POSSIBLY ON LARGER SCALE THAN BEFORE.

MR BREMRIDGE ADDED THAT OUTFLOW COULD ALSO MEAN A SHIFT OUT OF HONG KONG DOLLARS INTO FOREIGN CURRENCIES, WHETHER OR NOT SUCH CURRENCIES REMAINED IN HONG KONG.

HOWEVER, FOR EVERY SELLER OF HONG KONG DOLLARS THERE MUST BE A BUYER, HE POINTED OUT.

HE EXPLAINED THAT WHEN DEMAND FOR FOREIGN CURRENCY EXCEEDED SUPPLY, THE PRICE OF FOREIGN CURRENCY WOULD INCREASE, WHICH WAS WHAT HAD HAPPENED IN HONG KONG.

+ IN OTHER WORDS, THE FOREIGN EXCHANGE VALUE OF THE POOL OF HONG KONG DOLLARS, OR THE PURCHASING POWER OF THAT POOL IN TERMS OF GOODS PRICED IN FOREIGN CURRENCIES, HAD DECREASED, HE SAID.

SUMMING UP, MR BREMRIDGE SAID THAT GIVEN THE VERY SPECIAL CIRCUMSTANCES HONG KONG WAS FACING, DEVELOPMENTS IN THE MONETARY SECTOR HAD BEEN ENCOURAGING,

+THE MONETARY AGGREGATES ALTHOUGH DIFFICULT TO INTERPRET IN VIEW OF THE STRUCTURAL CHANGES THAT HAVE TAKEN PLACE, ALSO APPEAR TO BE BEHAVING WELL.

+THERE WAS A MARKED SLOWING DOWN DURING THE YEAR IN THE GROWTH RATE OF LOANS AND ADVANCES FOR USE IN HONG KONG.

→INFLUENCED BY THE INFLOW OF FOREIGN CURRENCY DEPOSITS, TOTAL M3 GREW RAPIDLY BY 42 PER CENT; BUT AS HK$M3 GREW BY ONLY TWO PER CENT, I AM GENERALLY SATISFIED THAT THE MONEY SUPPLY WAS BEHAVING IN A WAY HELPFUL TO THE ECONOMY, + MR BREMRIDGE SAID.

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