Hong Kong Monetary Authority chief executive Norman Chan Tak-lam plans to tell the Legislative Council next Monday that it will be alert to asset price inflation and the timing of possible stimulus fund withdrawals by central banks around the world. In documents filed with Legco yesterday before Chan's meeting with the Panel on Financial Affairs on February 1, the HKMA said it would monitor risks relating to the sustainability and stability of the global economic recovery and financial institutions, as well as the timing of stimulus withdrawals and pressures on asset prices from capital inflows. The HKMA added that the housing market saw a slowdown in the fourth quarter of last year, falling from an average of 11,000 transactions a month in the five months before the quarter to 9,000 in December. Authority statistics released yesterday show that mortgage loans approved in the month declined 5.8 per cent to HK$19.7 billion compared to November. It also announced it would issue HK$25 billion worth of additional Exchange Fund Bills in the February 2, 9 and 12 tenders in response to demand from banks for the paper because of the amount of liquidity in the banking system. Last year, HK$640.7 billion was injected into the banking system by the HKMA, with an additional HK$386.4 billion of Exchange Fund Bills issued to moderate the expansion of the aggregate balance, which stood at HK$264.6 billion at the end of the year. The authority also said it would submit legislative proposals to Legco in the second quarter to raise the coverage amount of the Deposit Protection Scheme to HK$500,000 from HK$100,000. On compensation for investors in Lehman Brothers Holdings-linked products, the HKMA said that about 79 per cent of the cases had been settled of the 21,600 investigations filed. It aims to complete the compensation process by the end of March. Following consultation over the Securities and Futures Commission's proposals to enhance investor protection, the HKMA said it would take into consideration comments by the Hong Kong Association of Banks over the need to balance measures protecting investors with maintaining an efficient distribution system for investment products.
