XN000022-1989-08-25 — Page 5

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FRIDAY, AUGUST 25, .1989

IN LINE WITH THE STRENGTHENING OF THE U.S. DOLLAR, EXCHANGE VALUE OF THE HONG KONG DOLLAR APPRECIATED.

THE OVERAL).

THE LOCAL INTEREST RATES ROSE FURTHER DURING SECONDLY, QUARTER BUT SOFTENED SLIGHTLY SINCE APRIL.

THERE

FIRST

RATES

TIGHTENED.

WAS, HOWEVER, A TEMPORARY SURGE IN LOCAL INTEREST

+ IN EARLY JUNE, AS LIQUIDITY IN THE INTERBANK MARKET

THIRDLY, AFFECTED BY THE EVENTS IN CHINA, LOCAL STOCK PRICES FELL SUBSTANTIALLY IN LATE MAY AND EARLY JUNE. A PERIOD OF VOLATILITY IN THE STOCK MARKET FOLLOWED.

FOURTHLY, DOMESTIC LOANS AND ADVANCES INCREASED LESS RAPIDLY IN LOCAL MONEY THE SECOND QUARTER THAN IN THE FIRST QUARTER, WHILE THE SUPPLY CONTINUED TO SHOW MODERATE GROWTH,

SINCE EARLY JUNE. BANKS HAD GENERALLY BECOME MORE CONSERVATIVE IN THEIR LENDINGS, PARTICULARLY IN RESPECT OF PROPERTY MORTGAGES.

GOVERNMENT ECONOMIST SAID THAT THE ECONOMIC FORECASTS 1989 WERE UPDATED IN THE LIGHT OF THESE DEVELOPMENTS.

THE

FOR

SIX PER

THE FORECAST GROWTH RATE OF THE GDP WAS LOWERED FROM CENT TO FIVE PER CENT. THIS WAS THE COMBINED RESULT OF A FASTER EXPECTED SLOW-DOWN IN ECONOMIC ACTIVITY DURING THE SECOND QUARTER OF THE REPERCUSSIONS BROUGHT ABOUT BY THE RECENT EVENTS IN CHINA.

THAN AND

"HOWEVER, JUDGING

FROM THE LATEST TRENDS. THE IMPACT OF LATTER FACTOR IN THE SHORT TERM IS PROBABLY NOT AS SEVERE AS INITIALLY

AND THOUGHT,

OF SEEMS UNLIKELY TO OUTRUN THE CYCLICAL DOWNTURN ECONOMY THAT HAS BEEN GOING ON FOR SOME TIME," HE SAID.

THE

THE

18 PER CENT; THAT OF IMPORTS WAS REDUCED AT 12.3 PER CENT.

IN THE EXTERNAL SECTOR, THE FORECAST GROWTH RATE IN REAL OF DOMESTIC EXPORTS WAS LOWERED TO 4.5 PER CENT, FROM SIX PER CENT THE

OF MAY UPDATE. THE FORECAST GROWTH RATE

RE-EXPORTS UNCHANGED

TERMS

IN

REMAINED

SLIGHTLY,

TO

INVISIBLE TRADE WAS EXPECTED TO GROW MORE SLOWLY. AT SEVEN

(INSTEAD OF CENT IN REAL TERMS

11 PER CENT IN THE MAY UPDATE) EXPORTS OF SERVICES AND FIVE PER CENT (INSTEAD OF 10 PER CENT IN MAY UPDATE FOR IMPORTS OF SERVICES.

PER

FOR

THE

ON THE PERFORMANCE OF DOMESTIC EXPORTS, ALTHOUGH THE ORDERS

FOR THE LARGE POSITION

MANUFACTURERS UP

WAS TO JUNE

STILL SATISFACTORY, THE VARIOUS MAJOR INDUSTRIES ARE FACING MIXED IN THE SHORT TERM.

PROSPECTS

MOST INDUSTRIES ARE AFFECTED BY A SLACKENING OF DEMAND FOR HONG KONG'S PRODUCTS OVERSEAS, PARTLY AS A RESULT OF SLOWER ECONOMIC GROWTH IN SUCH MARKETS AS THE UNITED STATES.

/MOREOVER, THE