Hong Kong Monetary Trends: August Sees Surge in Deposits and Decline in Loans

Hong Kong’s monetary authority, the HKMA, has reported a slight increase in total deposits held by authorized institutions in August 2023. According to the recent publication on September 29, there was a 0.6% increment in total deposits. This consisted of a 0.4% increase in Hong Kong dollar deposits and a rise of 0.8% in foreign currency deposits. Over the course of the year, total deposits grew by 2.0% and Hong Kong dollar deposits increased by 1.9%.

One notable highlight was the significant growth in renminbi deposits in Hong Kong, which rose by 6% in August. Corporate fund flows were the primary driver behind this increase, with renminbi deposits ending the month at RMB962.5 billion. Cross-border trade settlement also saw a substantial increase, with the total remittance of renminbi climbing to RMB1,121.2 billion in August, up from RMB1,022.1 billion in July.

However, there was a decrease in total loans and advances, with a 0.3% drop in August and a 1.7% drop over the year. This included a 0.2% decrease in loans for use in Hong Kong and a 0.5% drop in loans for use outside of Hong Kong during August.

The Hong Kong dollar loan-to-deposit ratio decreased from 87.8% in July to 87.1% at the end of August. This reduction was attributed to the increase in Hong Kong dollar deposits and a simultaneous decrease in Hong Kong dollar loans.

In terms of money supply, both Hong Kong dollar M2 and M3 experienced a 0.3% increase in August and a 1.4% increase compared to the previous year. However, seasonally-adjusted Hong Kong dollar M1 saw a decrease of 0.4% in August and a significant drop of 18.5% compared to the previous year, partly due to investment-related activities.

The HKMA cautioned against drawing definitive conclusions from these monthly monetary statistics, highlighting their susceptibility to volatilities influenced by various transient factors. These factors include seasonal and IPO-related funding demand, as well as other business and investment-related activities.

These findings emphasize the need for a comprehensive understanding and cautious interpretation of the complex financial landscape in Hong Kong. With numerous dynamic elements impacting changes in deposits, loans, and other financial activities, it is crucial to consider the broader context and underlying factors at play.

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