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DISCUSSION TOPICS

DISCUSSION TOPICS. Updates on Financial and Economic Conditions Currency Stability Banking Stability Financial Infrastructure Hong Kong as an International Financial Centre The Exchange Fund. FINANCIAL AND ECONOMIC CONDITIONS. ECONOMIC SITUATION IN MAJOR COUNTRIES. Real GDP Growth.

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DISCUSSION TOPICS

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  1. DISCUSSION TOPICS Updates on • Financial and Economic Conditions • Currency Stability • Banking Stability • Financial Infrastructure • Hong Kong as an International Financial Centre • The Exchange Fund

  2. FINANCIAL AND ECONOMIC CONDITIONS

  3. ECONOMIC SITUATION IN MAJOR COUNTRIES Real GDP Growth Source: Bloomberg

  4. ECONOMIC SITUATION IN MAJOR COUNTRIES Purchasing Manager Index Retail Sales Source: Bloomberg and CEIC

  5. GLOBAL ECONOMIC GROWTH FORECASTS Real GDP Growth (% year-on-year) Source: Consensus Forecasts

  6. US EQUITY INDEX Source: CEIC

  7. US LONGER-TERM INTEREST RATES Source: CEIC

  8. US: CONSUMPTION GROWTH & BUSINESS ACTIVITY Source: CEIC

  9. US: CORPORATE PROFITS Source: CEIC

  10. US: WEEKLY INITIAL JOBLESS CLAIMS Source: CEIC

  11. US: NEW FISCAL STIMULUS PACKAGE • The new US$858 billion fiscal stimulus package passed by the Congress in December 2010: • Temporary extension of tax relief, including all Bush-era tax cuts ($668 billion) • A 2%, one-year cut in Social Security payroll tax from 6.2% to 4.2% ($112 billion) • Temporary extension of emergency unemployment benefits ($57 billion) • Temporary extension of investment incentives ($22 billion)

  12. US: COMPARISON OF CURRENT ECONOMIC RECOVERY WITH PAST CYCLES * Excluding the 1980 recession due to double-dip Source: CEIC

  13. US: COMPARISON OF UNEMPLOYMENT RATES WITH PAST CYCLES * Excluding the 1980 recession due to double-dip Source: CEIC

  14. US: STRUCTURAL MISMATCH IN THE LABOUR MARKET Note: The Beveridge curve (the black fitted line) is derived frommonthly data between December 2000 and December 2009. Source: CEIC

  15. US: HOUSE PRICES AND SUPPLY OF UNSOLD HOMES Source: CEIC

  16. US: FISCAL SITUATION Source: Congressional Budget Office

  17. EUROPEAN SOVEREIGN DEBT PROBLEM: CDS SPREADS Prices of 5-year sovereign CDS Source: Bloomberg

  18. EUROPEAN SOVEREIGN DEBT PROBLEM: PUBLIC DEBT & BORROWING COST * Government debts in 2011 are forecasts; bond yields are the latest available. Source: European Commission (European Economic Forecast, Autumn 2010) and EcoWin.

  19. EUROPEAN SOVEREIGN DEBT PROBLEM: ECONOMIC GROWTH Real GDP growth rate Source: Consensus Forecasts, February 2011

  20. JAPAN: AGEING POPULATION IS REDUCING LONG-TERM POTENTIAL OUTPUT Source: CEIC and United Nations

  21. JAPAN : GOVERNMENT AND PRIVATE SPENDING Source: CEIC

  22. ECONOMIC GROWTH IN ASIA Source: CEIC

  23. ASIAN ECONOMIC GROWTH FORECASTS Real GDP Growth (% year-on-year) Source: CEIC and Consensus Forecasts (Feb 2011)

  24. CURRENCY APPRECIATION AND RESERVES ACCUMULATION IN ASIAN ECONOMIES • The increase in foreign reserves in Hong Kong was partly contributed by the investment income Source: Bloomberg and CEIC

  25. INFLATIONARY PRESSURES IN ASIAN ECONOMIES Annual inflation rate (% year-on-year) Sources: Census and Statistics Department, CEIC and Consensus Forecasts (Feb 2011)

  26. HONG KONG ECONOMIC SITUATION Change in Real GDP

  27. HONG KONG ECONOMIC SITUATION Retail Sales and Exports

  28. HONG KONG ECONOMIC SITUATION Business Outlook

  29. HONG KONG ECONOMIC SITUATION Labour Market Unemployment rate

  30. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: INFLATION Hong Kong and Mainland 2010 inflation and 2011 forecast Source：Consensus Forecast (May and Oct 2010 and Feb 2011)

  31. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: INFLATION Underlying inflation and contributions of its components Underlying inflation: Netting out the effects of all Government's one-off relief measures from headline inflation.

  32. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: INFLATION CCPI rental component and residential property price index

  33. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: EQUITY MARKET Hong Kong and Asia Pacific equity market performance

  34. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: EQUITY MARKET Share of stock-market-related loans to total domestic loans

  35. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Residential property prices and transaction volume

  36. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Changes in property-related loans

  37. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Year-on-year change in outstanding mortgage loans *There is a break in data series at December 2000 due to an increase in the number of surveyed institutions.

  38. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET New mortgage loans made and approved *There is a break in data series at December 2000 due to an increase in the number of surveyed institutions.

  39. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Average loan size and average mortgage period

  40. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Transaction volumes in residential property market

  41. ASSESSMENT OF RISK ON HONG KONG’S FINANCIAL STABILITY: PROPERTY MARKET Applications under Mortgage Insurance Programme

  42. CURRENCY STABILITY

  43. HONG KONG DOLLAR SPOT EXCHANGE RATE

  44. AGGREGATE BALANCE

  45. HONG KONG DOLLAR FORWARD EXCHANGE RATE

  46. DOMESTIC INTEREST RATES

  47. EQUITY FUND-RAISING AND NET INFLOWS

  48. BANKING STABILITY

  49. BANKING SECTOR PERFORMANCE Locally incorporated AIs continued to be well capitalised

  50. BANKING SECTOR PERFORMANCE Liquidity ratio of retail banks remained well above statutory minimum of 25%

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