Hong Kong Debt Surpass 9T

Hong Kong’s total loans and advances grew by 0.9% in June to HKD 9.8 trillion, the monetary authority said on August 1.


The Hong Kong-dollar loan-to-deposit ratio went up to 85.4% at the end of June from 83.9% at the end of May, the Hong Kong Monetary Authority revealed. Loans for IPOs jumped up in the month.

Hong Kong’s retail sales grew at its weakest in three months in January, in value terms, due to a decline in tourist arrivals from mainland China and new year holiday distortions. The Lunar New Year fell in January last year but was in February this year. Retail sales in 2017 rose 2.2% in value terms over 2016, ending a three-year slump in the sector.
January tourist arrivals slid 2.6% from a year earlier to 5.33 million, ending four straight months of growth, according to the Hong Kong Tourism Board. Mainland visitors, which accounted for 77% of the total, fell 5.5% on year, in their first drop since August last year.    The total number of visitors increased last year, rising 3.2%, after declining in 2015 and 2016. Of those, mainland visitors were 3.9% higher than in 2016.


The Philippines posted a record USD3.78-billion trade deficit in November, as imports grew while exports rose at a slower pace, official data released today showed.


Exports grew 1.6% to USD4.96 billion in November 2017 from the same period in 2016. Imports rose 18.5% to USD8.74 billion during the same comparable period, the Philippine Statistics Authority said.Analysts had predicted the peso’s decline this year with the government’s P8-trillion infrastructure program expected to drive the importation of capital goods, according to agency report. Iron, steel, mineral fuels and telecommunication equipment were the top gainers in imports in November, PSA data showed.


Hong Kong was the Philippines largest export market in November 2017, accounting for 15.4% of total exports and with an estimated value of USD765.95 million. Japan was the second largest export market, followed by the US and China, the PSA said.


China was the Philippines’ largest source of imports in November , accounting for 19.4% of the total. Japan was the second largest import source, followed by South Korea, Thailand and the US, data showed.

Hong Kong’s foreign trade gap widened in November from a year ago, as imports grew faster than exports, data from the Statistics Department showed Thursday.


The visible trade deficit rose to HKD39.7 billion in November from HKD34.05 billion in the corresponding month last year. The shortfall was declined from HKD43.96 billion in October.


Exports climbed by 7.8% while imports climbed 8.6%, respectively in November from a year earlier.


– ACMR and agencies

Standard and Poor’s has cut its long-term rating on Hong Kong, following its cut to China’s sovereign credit rating , to reflect “spillover risks” to the territory.


S&P lowered its long-term rating on Hong Kong to AA+ from AAA  after it cut its credit rating on China. The ratings agency cited rising economic and financial risks in China following a prolonged period of strong credit growth as reasons for it cutting its rating on the world’s second-largest economy.


Strong institutional and political ties exist between China and Hong Kong, arising from the latter’s status as a Special Administrative Region of China. Consequently, we view a weakening of credit support for China as exerting a negative impact on the ratings on Hong Kong beyond what is implied by the territory’s currently strong credit metrics.

S&P Global Ratings lowered the long-term and short-term credit rating on China citing strong credit growth concerns.

On September 21 rating, the rating agency lowered long-term sovereign credit ratings on China to ‘A+’ from ‘AA-‘ and the short-term rating to ‘A-1’ from ‘A-1+’. The outlook on the long-term rating is stable. The agency also revised transfer and convertibility risk assessment on China to ‘A+’ from ‘AA-‘.


“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks”, the rating agency said.


S&P said the recent intensification of government efforts to rein in corporate leverage could stabilize the trend of financial risk in the medium term. However, it foresees that credit growth in the next two to three years will remain at levels that will increase financial risks gradually.


Consequently, the rating agency also lowered ratings on DBS China, Hang Seng China and HSBC China to ‘A+/A-1’ from ‘AA-/A-1+’, citing ratings on the banks are capped by sovereign rating on China.


Moody’s Investors Service today downgraded China’s long-term local currency and foreign currency issuer ratings toA1 from Aa3. 

The rating agency said the downgrade reflects Moody’s expectation that China’s financialstrength will erode somewhat over the coming years, with economy-widedebt continuing to rise as potential growth slows.

The rating agency said China’s economy-wide debt levels were expected to increase further in the years ahead. It estimated the government debt burden would rise toward 40% of GDP by 2018.

Rating Agency Moody’s Investor Services cuts Hong Kong’s local and foreign currency ratings to Aa2 from Aa1 rating following it downgraded its rating on China amid concerns over the country’s rising debt problems.

The rating agency said the downgrade in Hong Kong’s rating reflects “Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland”.

It also pointed out the Hong Kong banking sector’s exposure to mainland China increased further in the second half of last
year. Total mainland-related lending rose to HKD3.6 trillion at the end of 2016, up 3.5% compared with last June, while other non-bank exposures also increased by 11.4% to HKD1.2 trillion.

Singapore economy expanded 2.0% in 2016, the trade and industry ministry(MTI) said. The MTI has maintained the GDP growth forecast at “1.0 to 3.0%” for 2017.

The 2% economic growth was mostly driven by the last quarter growth which expanded 2.9% year-on-year. On seasonally-adjusted annualised basis, the Q4 GDP expanded by 12.3% from the Q3, reversing the contraction of 0.4% in the third quarter.

By sector, the MTI said the manufacturing sector grew by 11.5%  year-on-year in the last quarter, accelerating from the 1.8% growth in the preceding quarter, led by growth in the electronics and biomedical manufacturing clusters. The electronics cluster was supported by a recovery in global semiconductors demand, while the biomedical manufacturing cluster was boosted by output growth in both the pharmaceuticals and medical technology segments, the ministry said.

On a quarter-on-quarter seasonally-adjusted annualised basis, the manufacturing sector rebounded strongly from the 5.0 5 decline in the third quarter to growth of 39.8% in the fourth quarter.

The construction sector shrank by 2.8% cent year-on-year, extending the 2.2% contraction in the previous quarter. Growth was weighed down primarily by the decline in private sector construction activities. On a quarter-on-quarter basis, the sector expanded at a seasonally-adjusted annualised rate of 0.8 per cent, a reversal from the 12.6 per cent contraction in the preceding quarter. The wholesale & retail trade sector grew by 0.4 per cent year-on-year, slightly faster than the 0.1 per cent growth in the third quarter. Growth was supported by the wholesale trade segment, which expanded on the back of a pick-up in oil and non-oil trade.

The retail trade segment, on the other hand, registered flat growth. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector expanded by 2.2%, up from 1.7% growth in the previous quarter.


Article also available at  APMR

Economists expect China’s monetary policy to be less accommodative in the foreseeable future amid rising CPI and asset inflation and the incomplete task of deleveraging.
Standard Chartered economists think China’s monetary policy will not diverge significantly from the Fed policy this year. “With the market pricing in two Fed rate hikes this year, we think the PBoC may raise the policy rate level by another 20bps for the rest of the year, including rates on reverse repos, standing lending facilities (SLF), MLF and pledged supplementary loans (PSL)”, SCB economists said.
“We do not expect cuts in benchmark deposit and lending rates or the reserve requirement ratio. Instead, the PBoC is likely to keep money-market liquidity tightly balanced and gradually raise interest rates on its lending to commercial banks. The PBoC may raise policy rates further in the year.”

DBS also sees “A series of signs have flagged an inflection point” in the People’s Bank of China’s (PBoC) monetary policy of tightening. On February 3, the authority raised rates on seven-, 14- and 28-day reverse repos by 10 basis points each to 2.35%, 2.5%, and 2.65%, respectively. The bank noted it is the first increase since 2013 for the two shorter tenors, and the first since 2015 for the 28-day contracts.

The moves come one week after PBoC increased the one-year rates on Medium-term Lending Facility to 3.1% from 3%. The PBoC conducted 6M and 1Y medium-term lending facility (MLF) operations  on January 24 of the amounts of CNY 138.5bn and CNY 107bn , respectively.

SCB economists think the move confirms that monetary and credit policy will likely be moderately tighter this year  as the move is to help roll over maturing MLFs and maintain stable liquidity in the banking system, as the Central Economic Work conference convened last month set a “prudent and neutral” monetary policy stance for 2017.