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The rise was largely attributable to the valuation effect stemming from a stronger yen, as the bulk of these loans were euro-yen loans booked by Japanese banks in Hong Kong.

Analysed by currency, HK dollar loans increased by 1.4% during the month while foreign currency loans rose by 2.6%. As HK dollar loans grew faster than HK dollar deposits, the HK dollar loan-to-deposit ratio rose to 108.6% at end-July, from 108.2% at end-June.

Money supply

With currency held by the public rising by 0.2% in July and HK dollar demand deposits by 3.2%, HK$MI grew by 1.9% during the month. HK$M2 and HK$M3 increased by 1% and 0.9% respectively in July, after both rising by 2.5% in June.

The growth in HK$M3 during the year to July remained broadly in line with that in domestic credit expansion and nominal GDP.