TNAG-0453-FCO40-518-Budget-of-Hong-Kong-1974-1975-1975 — Page 106

bank credit made available to customers for stock exchange transactions, which contributed to the rise in the ratio of advances and loans to deposits from 62% to 72% in the second half of the year. By the end of February 1973 the ratio had increased to 79% (partly on account of a large reduction in deposits during

February), and shortly thereafter the Hang Seng Index reached a peak of 1,775. This was followed by some profit-taking, and this, together with a number of other factors such as the discovery of a few forged share certificates, led to a sharp reaction with the result that by the end of March the index had fallen to 1,301.

Diagram 1 Hang Seng Index of Share Prices, 3 July 1972-31 December 1973

Index

1,800

1,700

1,600

1,500

1,400

1,300

1,200

1,100

1,000

900

800

700

600

500

400

(31 Jul 1964-100)

Jul Aug Sep Oct Nov Dec Jan

1972

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1973

48. The impact on the banking industry of the reversal of the trend in stock market prices can be gauged from the fact that the deposit liabilities of all banks declined by HK$2,869 million between the end of January and the end of May, and this was a significant factor accounting for the ratio of advances and loans to deposits increasing to 86% at that time. The decline in the Hang Seng Index, which began in March, continued, with minor fluctua- tions, throughout the remainder of the year, but

bank deposits began to increase again after May, and, at HK$26,191 million at the end of 1973, they were 6% higher than at the end of 1972.

49. The figures in Table 15 indicate that, despite the rather unusual sequence of events beginning in the second half of 1972, advances and loans to customers for the normal purposes of trade and industry were not unduly restricted during the second and third quarters of 1973 following the downturn in share prices.

Analysis of Banks' Advances and Loans, 1973

Table 15

Mar 1973

(HK$ million)

Sep 1973 (HK$ million)

Change (%)

Manufacturing, Agriculture and fisheries,

Transport and transport equipment, Electricity, gas and telephone, Building and construction, Mining and quarrying

6,648

7,149

7.5

General commerce

5,618

6,006

6.9

Financial concerns including banks, Stockbrokers,

Professional and private individuals

6,987

6,330

-9.4

Others

2,130

2,412

13.2

Total

21,383

21,897

2.4

15