XN000022-1994-05-27 — Page 11

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FRIDAY, MAY 27, 1994

INVESTOR AND END-USER

INTEREST, PRICES AND

AMIDST A KEEN RENTALS OF OFFICE SPACE SURGED FURTHER IN THE FIRST QUARTER.

ON SHOPPING SPACE, PRICES AND RENTALS CONTINUED TO RISE DUE ΤΟ THE SUSTAINED GROWTH IN BOTH LOCAL CONSUMER AND TOURIST SPENDINGS.

THE DEMAND FOR CONVENTIONAL FLATTED FACTORY SPACE CONTINUED TO BE DAMPENED BY THE ONGOING RELOCATION OF MANUFACTURING PROCESSES ACROSS THE BORDER.

BUT NEW INDUSTRIAL BUILDINGS DESIGNED ALSO FOR OFFICE USE REMAINED WELL-RECEIVED. WHILE PRICES FOR MODERN INDUSTRIAL PREMISES WERE STILL ON AN UPTREND, RENTALS WERE GENERALLY STABLE.

THE FINANCIAL SECTOR

THE MARKET EXCHANGE RATE OF THE HONG KONG DOLLAR AGAINST THE U.S. DOLLAR REMAINED STABLE DURING THE FIRST QUARTER, MOVING WITHIN A NARROW RANGE OF HK$7.723 TO HK$7.749 TO US$1 ON THE STRONG SIDE OF THE LINK.

FOLLOWING THE MOVEMENTS OF THE U.S. DOLLAR, THE HONG KONG DOLLAR EASED SLIGHTLY AGAINST THE MAJOR EUROPEAN CURRENCIES DURING THE FIRST QUARTER. AGAINST THE JAPANESE YEN, IT WEAKENED FURTHER.

UPON THE UNIFICATION OF THE RENMINBI EXCHANGE RATE AND CONSEQUENTIALLY THE USE OF THE MARKET RATE IN PLACE OF THE PREVIOUS OFFICIAL RATE IN CALCULATING THE TRADE-WEIGHTED EFFECTIVE EXCHANGE RATE INDEX OF THE HONG KONG DOLLAR, THE INDEX INCREASED SHARPLY FROM 114.3 AT END-DECEMBER TO 127.8 IN EARLY JANUARY BEFORE CLOSING THE FIRST QUARTER AT 125.0.

ALONG WITH THE RISE IN THE U.S. FEDERAL FUNDS RATE, LOCAL MONEY MARKET INTEREST RATES GENERALLY MOVED HIGHER.

DEPOSIT RATES ADMINISTERED BY THE HONG KONG ASSOCIATION OF BANKS AND THE BEST LENDING RATE WERE ADJUSTED UPWARDS IN LATE MARCH, FOR THE FIRST TIME SINCE MAY 1991.

AFFECTED IN PART BY A SLOWER NET INFLOW OF FUNDS, THE GROWTH RATES OF BOTH HONG KONG DOLLAR DEPOSITS AND THE BROADER DEFINITIONS OF THE HONG KONG DOLLAR MONEY SUPPLY, HKSM2 AND HK$M3 MODERATED MARKEDLY, TO 2.5%, 3% AND 3% RESPECTIVELY DURING THE FIRST QUARTER.

THE

GROWTH RATE OF HONG KONG DOLLAR LOANS, ON THE OTHER

HAND, PICKED UP TO 5.7% DURING THE FIRST QUARTER. AS A RESULT, THE HONG KONG DOLLAR LOAN-TO-DEPOSIT RATIO ROSE.

THE HANG SENG INDEX, AFTER RALLYING TO A NEW RECORD HIGH OF 12,201 IN EARLY JANUARY, CONSOLIDATED THEREAFTER NOTWITHSTANDING THE ANNOUNCEMENT OF FAVOURABLE CORPORATE RESULTS.

A

THE THREAT OF AN IMMINENT RISE IN INTEREST RATES COUPLED WITH

BY INVESTORS CONTRIBUTED TO THIS MARKET CORRECTION. PROFIT-TAKING 24% DROP IN THE INDEX WAS RECORDED DURING THE FIRST QUARTER.

/INFLATION