Deposits and money supply fell moderately in August as few companies raised funds since market sentiment was hard hit by the ongoing anti-government protests, which are now in their 17th week, according to data released by the Hong Kong Monetary Authority on Monday. Hong Kong dollar deposits shrank 1.6 per cent month on month to HK$6.843 trillion (US$872.8 billion), leading M2 money supply lower by 1.5 per cent from a month earlier. M3 fell 1.4 per cent. “The decline in Hong Kong dollar deposits in August reflected in part the less buoyant fundraising activities during the month compared to July,” the HKMA said. Money supply M2 refers to the sum of banknotes and coins held by the public plus savings and time deposits with licensed banks. M3 includes M2 plus deposits with restricted licensed banks and deposit taking companies. Short sellers believe a weakening economy will force Hong Kong Monetary Authority to tweak the currency peg When international investors bring money in the city to buy shares of initial public offerings, Hong Kong dollar deposits and money supply rises. The IPO market in August had its worst month since 2012. There was only one IPO that raised HK$130 million compared to 15 IPOs in July worth HK$1.65 billion. The HKMA said that deposits had risen once again in the first three weeks of September, but did not give an exact number. After the city’s leader Carrie Lam Cheng Yuet-ngor on September 4 announced that she would withdraw the extradition bill that triggered the protests, the Hang Seng Index rose over 6 per cent in the first half of last month, working as a catalyst for the IPO market. US dollar deposits in Hong Kong rose 2.7 per cent month on month in August to the equivalent of about HK$5.099 trillion, up 9.4 per cent from a year earlier, resulting from the Exchange Fund placing its foreign currency assets with banks. Yuan deposits also rose 4.6 per cent to 644.1 billion yuan (US$90.1 billion). Overall deposits in Hong Kong’s banking system edged up by 0.2 per cent month on month in August. The size of the Exchange Fund – the currency reserves used to defend the Hong Kong dollar – increased by 0.6 per cent, or HK$25.3 billion to HK$4.163 trillion in August from a month earlier. “Even though we have experienced several months of social unrest, the banking and financial system are still very stable and they are functioning smoothly and orderly,” Norman Chan Tak-lam, chief executive of HKMA, said during his last media briefing on Monday. Chan, who retires on Tuesday, helped set up the HKMA in 1993. He turns 65 at the end of October. He helped to defend the peg linked system in 1998 when it came under attack from short sellers and steered the city’s de facto central bank through the global financial crisis in 2009. “The HKMA has introduced a lot of measures to strengthen the local currency and banking system over the past two decades and we can cope with any overseas or local financial tsunami,” Chan said. He will be succeeded by Eddie Yue Wai-man, one of his three deputies. “Eddie is very experienced. He and the HKMA team will maintain the stability of the financial markets in Hong Kong,” Chan said.