XN000022-1993-08-27 — Page 7

FRIDAY, AUGUST 27, 1993

1993 RATE

THE BROADER DEFINITIONS OF THE HONG KONG DOLLAR MONEY SUPPLY. HK$M2 AND HK$M3, GREW BY 16.4% AND 15.1% RESPECTIVELY IN JUNE OVER A YEAR EARLIER, WHICH WERE BROADLY IN LINE WITH THE GROWTH OF NOMINAL GDP.

FOURTHLY, LOANS AND ADVANCES FOR USE IN HONG KONG GREW SOLIDLY DURING THE FIRST HALF OF THIS YEAR. IN PARTICULAR, THE GROWTH IN RESIDENTIAL MORTGAGE LOANS PICKED UP IN RECENT MONTHS.

FIFTHLY, IN THE LOCAL STOCK MARKET, THE HANG SENG INDEX RALLIED A NEW RECORD HIGH OF 7 447 ON 27 MAY, STIMULATED BY OPTIMISM OVER RESUMPTION OF THE SINO-BRITISH TALKS.

ΤΟ

THE MARKET

THEN UNDERWENT SOME CONSOLIDATION IN JUNE, WITH SHARE PRICES BEING DAMPENED BY THE CONCERN OVER THE SHARP DEPRECIATION OF THE RENMINBI IN THE SWAP CENTRES IN CHINA AND BY PROFIT-TAKING THE EARLIER PRICE GAINS.

ON

AT THE END OF JUNE, THE HANG SENG INDEX STOOD AT 7,099, GIVING AN INCREASE OF 29% OVER THE END OF 1992.

UPON THIS INCREASE, THE HONG KONG STOCK MARKET CONTINUED TO OUTPERFORM THE MAJOR STOCK MARKETS OVERSEAS.

MEANWHILE, NEW SHARE ISSUES IN THE LOCAL MARKET RECEIVED A HIGHLY ENTHUSIASTIC RESPONSE.

CONSUMER PRICE INFLATION WAS GENERALLY ON A MODERATING TREND DURING THE FIRST HALF OF 1993. THE YEAR-ON-YEAR RATE OF INCREASE IN THE CONSUMER PRICE INDEX (A) EASED APPRECIABLY FROM 9.4% IN THE FOURTH 8.2% QUARTER OF LAST YEAR TO 8.8% IN THE FIRST QUARTER AND FURTHER TO IN THE SECOND QUARTER OF THIS YEAR.

THE MODERATION WAS QUITE WIDESPREAD AMONGST THE VARIOUS COMPONENTS OF THE CP1. FOR THE FIRST HALF OF 1993 AS A WHOLE, THE CPI(A) ROSE BY 8.5% OVER A YEAR EARLIER. THE CORRESPONDING INCREASES IN THE CPI(B), HANG SENG CPI AND COMPOSITE CPI WERE 9.0%, 9.5% AND 9.0%.

MEASURING INFLATION ON A BROADER BASIS, THE GDP DEFLATOR BY 9.5% IN THE FIRST QUARTER OF 1993 OVER A YEAR EARLIER, COMPARED WITH AN INCREASE OF 10.2% IN THE PRECEDING QUARTER.

ROSE

MAINLY DUE TO THE CONTINUED IMPROVEMENT IN THE TERMS OF TRADE, THE GDP DEFLATOR SUSTAINED A RELATIVELY MORE RAPID INCREASE THAN

PRICE DEFLATORS.

THE OTHER

PRICE

IN FACT, FOR MANY OF THE GDP COMPONENTS, THE INCREASES IN THEIR DEFLATORS WERE RATHER MODERATE.

THE THE DOMESTIC DEMAND DEFLATOR, WITH AN INCREASE OF 5.5% IN FIRST QUARTER OF 1993 OVER A YEAR EARLIER, CONTINUED TO RISE MUCH MORE SLOWLY THAN THE CPI(A).

IN REVIEWING THE TRADE AND GDP FORECASTS AGAINST THE RECENT ECONOMIC DEVELOPMENTS AND THE SHORT-TERM OUTLOOK, ACCOUNT HAS BEEN TAKEN OF THE SLOWER THAN EXPECTED ECONOMIC RECOVERY IN THE MAJOR INDUSTRALISED COUNTRIES AND, IN PARTICULAR, THE RESTRAINT MEASURES RECENTLY ANNOUNCED BY CHINA TO ALLEVIATE OVERHEATING IN ITS ECONOMY.

/OBSERVATIONS SO