XN000022-1994-11-25 — Page 7

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FRIDAY, NOVEMBER 25, 1994

THE HANG SENG INDEX REACHED A LOW OF 8,395 ON JULY 11, FOLLOWING THE DOWNTREND IN THE SECOND QUARTER. THE STOCK MARKET THEN EXPERIENCED A CONSIDERABLE REBOUND, NOTWITHSTANDING THE LESS FAVOURABLE CORPORATE RESULTS ANNOUNCED BY SOME BLUE-CHIP COMPANIES AND THE CONSOLIDATION IN THE PROPERTY MARKET. STIMULATED FURTHER BY THE IMPROVED BILATERAL ECONOMIC RELATIONSHIP SUBSEQUENT TO THE U.S. SECRETARY FOR COMMERCE'S VISIT TO CHINA, THE HANG SENG INDEX BROKE THE 10,000 MARK AT THE BEGINNING OF SEPTEMBER. THE MARKET HOWEVER LOST SOME GROUND TOWARDS THE END OF SEPTEMBER, AMIDST CONCERN ABOUT A FURTHER RISE IN INTEREST RATES. NEVERTHELESS, THE HANG SENG INDEX STILL CLOSED THE THIRD QUARTER HIGHER THAN AT END-JUNE, AT 9,521. INFLUENCED BY THE SETBACK IN NEW YORK STOCK MARKET, THE HANG SENG INDEX FELL SHARPLY DURING THE PAST FEW DAYS. IT STOOD AT 8,648 ON THE CLOSE OF MARKET ON NOVEMBER 24.

INFLATION

CONSUMER

CONSUMER PRICE INFLATION, MEASURED IN TERMS OF THE PRICE INDEX (A), ACCELERATED TO 8.9% IN THE THIRD QUARTER, FROM 7.3% IN THE FIRST QUARTER AND 7.7% IN THE SECOND QUARTER. THIS WAS MAINLY DUE TO A TEMPORARY UPSURGE IN VEGETABLE PRICES DURING JULY AND AUGUST, CONSEQUENTIAL TO THE SERIOUS FLOODING IN SOUTH CHINA AND SEVERAL RAINSTORMS IN HONG KONG. AS VEGETABLE SUPPLY AND HENCE PRICES RETURNED то NORMAL, THE INCREASE IN THE CPI(A) EASED BACK IN SEPTEMBER. BOTH THE CPI(B) AND HANG SENG CPI SHOWED BROADLY SIMILAR MOVEMENTS, BUT THE EXTENT OF FLUCTUATION WAS SMALLER THAN IN THE CPI(A).

THE VOLATILE FOOD COMPONENT APART, THOSE COMPONENTS IN THE CPI RECORDING MORE RAPID PRICE INCREASES THAN AVERAGE, THEREBY CONTRIBUTING MUCH TO THE OVERALL INFLATION RATE, WERE STILL HOUSING, VARIOUS CONSUMER SERVICES, TRANSPORT, AND MORE RECENTLY CLOTHING AS WELL. WHILE DOMESTICALLY GENERATED INFLATIONARY PRESSURES REMAINED THE PRIMARY FACTOR UNDERLYING HONG KONG'S INFLATION, A GENERALLY FASTER INCREASE IN THE PRICES OF IMPORTS HAD GIVEN RISE TO RELATIVELY GREATER IMPORTED INFLATION LATELY.

IN

FOR THE FIRST NINE MONTHS OF 1994 AS A WHOLE, THE INCREASE THE CPI(A) AVERAGED AT 8.0%. THIS WAS APPRECIABLY SLOWER THAN THE INCREASE OF 8.5% IN 1993. THE AVERAGE INCREASES IN THE CPI(B) AND HANG SENG CPI IN THE FIRST NINE MONTHS OF THIS YEAR WERE 8.3% AND 9.8%. THE COMPOSITE CPI, AS AN AGGREGATE MEASURE OF CONSUMER PRICE INFLATION COVERING THESE THREE INDICES, HAD A CORRESPONDING INCREASE OF 8.6%.

THE GDP DEFLATOR, AS A BROAD MEASURE OF OVERALL INFLATION IN THE ECONOMY, ROSE BY 8.0% IN THE SECOND QUARTER OF 1994 OVER A YEAR EARLIER, REPRESENTING A SLOW-DOWN FROM THE INCREASE OF 8.9% IN THE FIRST QUARTER.

UPDATED FORECASTS

THE GDP FORECAST FOR 1994 HAS BEEN REVIEWED BY INDIVIDUAL COMPONENTS BASED ON THE NEWLY REVISED SERIES OF GDP ESTIMATES. THE CORRESPONDING PRICE FORECAST HAS ALSO BEEN EXAMINED. THE UPDATED FORECASTS ARE SUMMARISED IN THE TABLE ANNEXED.

/IN THE