Hong Kong: Monetary Statistics For June 201129 July, 2011, 22:11. Posted by Zarathustra
Tags: Economy, Hong Kong, Money Supply
Hong Kong Monetary Authority published the monetary statistics for June earlier today.
Hong Kong dollar M1 money supply fell by 3.7% in June compared to the previous month on a non-seasonally adjusted basis after rising for 2 months, while on a seasonally adjusted basis, M1 fell by 3.0% compared to the previous month. Hong Kong dollar M2 money supply fell by 1.3% compared to the previous month, decreasing for the second straight month. Similarly, the Hong Kong dollar M3 fell by 1.3% compared to the previous month.
On a year-on-year basis, Hong Kong dollar M1 money supply increased by 12.5% (vs. 12.5% increase for May), M2 increased by 8.4% (vs. 11.5% increase for May), and M3 increased by 8.3% (vs. 11.4% increase for May).
Total deposits fell 0.9% compared to the previous month. Total Hong Kong dollar deposits fell by 1.6% compared to the previous month, while foreign currency deposits fell by 0.2%.
The overall story here is consistent with the view here that the rapid expansion of money and credit is a bit of a past here. Money supply is currently still below the peak we saw in October of 2010 right before the second round of quantitative easing started, reflecting the reality that the tightening in China is slowly draining liquidity out of the system in Hong Kong. We have seen further confirmation from the bizarre fight for deposits, with HSBC now offering 1-month fixed deposits rate at 1.0%, hardly an attractive rate, but a very unusual move, especially as the HIBOR is still standing at low level.
Source: Hong Kong Monetary Authority, Centaline
Macro risks are quite serious at the moment. The European debt crisis is far from being solved as we see high yields across the peripheral Europe today. In the United States, the economy is also pretty close to double-dip as it happens while general price level has been edging higher, limiting the potential policy options as far as the Federal Reserve is concerned, and the continuous debt limit rubbish will undoubtedly end in some sort of fiscal consolidation, making policy response from the fiscal front also impossible (although that will be positive for the US dollar). In China, the HSBC PMI flash estimate pointed to a contraction of manufacturing. We have heard some small rumblings that the People’s Bank of China may actually consider lowering the reserve requirement ratio, which, if true, highlights the the policy makers are giving up on inflation front in hope not to sacrifice on growth. There is nothing which looks pretty right now.