Hong Kong: Monetary Statistics For April 2011

Hong Kong Monetary Authority published the monetary statistics for April 2011.

Hong Kong dollar M1 money supply increased by 3.2% in April on a seasonally adjusted month-on-month basis, or 1.3% on a unadjusted basis. Hong Kong dollar M2 money supply increased by 2.3% on a month-on-month basis.

On an year-on-year basis, Hong Kong dollar M1 money supply increased by 2.2%, while M2 money supply increased by 6.0%. The year-on-year figures have been steadily dropping, indicating slowing growth of money supply, or in some months, drop in money supply on a month-on-month basis.

Other figures in the latest monetary statistics include an increase of Hong Kong dollar deposits by 2.3%, and increase of Renminbi deposits by 13.1%, obviously due to the perceived prospect of Chinese Yuan appreciation. Total loans grew by 1.8%, with loans for use in Hong Kong increased by 1.1% and loans for use outside expanded by 4.5%. The loan-to-deposit ratio in April for the banking system declined slightly from 81.7% to 80.4%.

Again, the reason I look at these figures closely is that their moves are closely related to property prices.

Source: Hong Kong Monetary Authority

The increase of money supply on a month-on-month basis should provide some comfort as to where property prices are going, although the year-on-year trends are undoubtedly showing slower growth. In fact, if the figures remain unchanged for the rest of the year, we will most probably see some negative year-on-year change towards the end of third quarter and the beginning of the fourth quarter. Even though it still all looks very well in the property market, these figures do not bode well for the market for the rest of the year.

My base case for property prices in 2011 was looking for 0-10% prices change for this year, and my latest view remains that the lower end of the 0-10% range will be more likely, implying a possibility of as much as about 10% downside. At this juncture, I see no reason to change this view.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.