XN000022-1996-11-29 — Page 9

-7.

The financial sector

The market exchange rate of the Hong Kong dollar against the US dollar remained on the strong side of the link during the third quarter of 1996, moving within a narrow range of 7.732 to 7.741. The movements in the exchange rates of the Hong Kong dollar against other major currencies were mixed during the third quarter, reflecting closely the trends of the US dollar. For the third quarter as a whole, the Hong Kong dollar strengthened by 1.7% against the Japanese Yen but depreciated by 0.7% against the Pound Sterling, whilst remaining unchanged against the Deutschemark. In all, the trade-weighted Effective Exchange Rate Index of the Hong Kong dollar edged up from 124.5 at end-June 1996 to 124.7 at end-September.

The growth in Hong Kong dollar deposits (adjusted to include swap deposits) climbed back to 4.2% during the third quarter, having decelerated from a 3.8% growth during the first quarter to 2.9% during the second quarter. Hong Kong dollar loans as well as loans for use in Hong Kong however showed a slower increase during the third quarter, following a rapid expansion during the second quarter.

The local stock market put up a strong performance in the third quarter, with the average daily turnover rising to around $4.6 billion, from $3.8 billion in the second quarter. At end-September, the Hang Seng Index closed at 11 902, the highest in 31 months. Concurrently, stock market capitalisation rose to $2,957 billion at end- September 1996, from $2,694 billion at end-June 1996 and $2,257 billion at end- September 1995.

Updated forecasts

The GDP and price forecasts for 1996 have again been reviewed by individual components. The updated forecasts are summarised in the table annexed.

In the external sector, the forecast growth rate in real terms of total exports of goods in 1996 is revised further down to 5.4%, from 6.5% in the August update. This revision is mainly to take account of the actual export performance in the first nine months of the year. Within the total exports, the forecast growth rate in real terms of re-exports in 1996 is lowered to 8% and that of domestic exports to -7.5%, from 9% and -5.5% respectively in the earlier forecast.