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SCMP Reporter

DECLINING interest rates in major foreign currencies continued to drive depositors towards Hong Kong dollar and US dollar deposits in June, as shown by the latest monetary statistics published by the Hong Kong Monetary Authority (HKMA).

  Non-US dollar foreign currency deposits fell by 0.4 per cent in June. On a year-on-year basis, such deposits plummeted drastically by 10.7 per cent.

  According to the HKMA, such a decline would have been more serious if the exchange rate appreciation effect of some major foreign currencies, such as the yen and deutschemark, were discounted.

  By contrast, US dollar deposit grew by 1.6 per cent in June and by 11 per cent over a year earlier.

  Hong Kong dollar deposits also recorded moderate growth of 1.4 per cent in June, with savings deposits growing 0.3 per cent and demand deposits 1.1 per cent.

  Time deposits grew by 2.4 per cent, a slight slowdown from the 5.5 per cent increase in May.

   The effect of a deposit rate increase in late May has narrowed the interest rate differential between swap deposits and Hong Kong dollar deposits.

  As a result, the growth of foreign currency swap deposits slowed to 3.2 per cent in June, compared with 7.5 per cent in May.

  Because of the decline in non-US foreign currency deposits, total M2 and M3, which included the money supply for both Hong Kong dollar and foreign currency, reported a much slower growth than the money supply measures for Hong Kong dollars alone.

  Hong Kong dollar M3 grew by 1.8 per cent in June and its year-on-year growth accelerated slightly to 25.8 per cent. Hong Kong dollar M2 showed similar movements.

  But the annual growth for total M3 and M2 were 13.3 per cent and 12.7 per cent, respectively.

  Hong Kong dollar M1, the narrowest measure, edged up 0.9 per cent in June.

  Despite the small increase, the year-on-year growth of M1 progressively slowed from a high of 33.4 per cent in February to 6.2 per cent in June after a gradual decline in demand deposits and cash in circulation in the previous months.

  Movement of total M1 mirrored Hong Kong M1 and increased year-on-year by 6.1 per cent.

  On the loan side, total outstanding loans in Hong Kong picked up strongly by four per cent in June compared with a 0.3 per cent decline in May.

  The large increase was mainly attributable to a 5.6 per cent growth in foreign currency loans.

  Even so, the Hong Kong dollar loan-to-deposit ratio declined slightly to 113.5 per cent. That is because Hong Kong dollar loans increased by one per cent in June, slower than the 1.4 per cent growth in Hong Kong dollar deposits.

  ''The gradual decline of this ratio since March 1994 indicates that the banking sector has been more prudent in its lendings recently,'' the HKMA said.

  ''Further trend development along this direction can be a constraint factor on future Hong Kong dollar money supply growth.''   Loans to finance visible trade continued with solid growth of 3.9 per cent. Loans for use outside Hong Kong also recorded strong growth of 5.9 per cent in June, reflecting the growth in foreign currency loans.

  During the second quarter this year, total loans for use in Hong Kong, excluding those for trade financing, jumped by 4.7 per cent.

  Of those, loans to individuals for the purchase of residential property grew by five per cent.

  ''The strong increase was in part reflecting the buoyant property market in early 1994 since loans approved but not yet drawn in the first quarter were carried forward to the second quarter,'' the HKMA said.

  As the property market cooled down in the second quarter, those loans were likely to show little growth in the third quarter.

  Outstanding loans for all major economic sectors recorded steady growth in the second quarter.



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