ANZ RESEARCH GREATER CHINA ECONOMIC INSIGHT

Transcription

1 ANZ RESEARCH GREATER CHINA ECONOMIC INSIGHT SEPTEMBER INSIDE Data Preview Forecasts Greater China Chartbooks China Taiwan Hong Kong Important Notice DATA PREVIEW With concerns of a slowdown in activities amid a weakening global outlook, the focus over the next seven days will be on China s HSBC Flash PMI; Hong Kong s ust CPI reading; and Taiwan s ust unemployment rate and industrial production - a poor print for both will reinforce our belief that the CBC will temporarily adopt a dovish stance. GREATER CHINA ECONOMIC CHARTBOOK This week s Insight includes the monthly chartbook for Greater China which provides an overview of economic indicators for mainland China, Taiwan and Hong Kong. CONTRIBUTORS Li-Gang Liu Head of Greater China Economics LiGang.Liu@anz.com Nicholas Zhu Head of Macro-Commodity Research, Asia Nicholas.Zhu@anz.com Raymond Yeung Senior Economist, Greater China + 99 Raymond.Yeung@anz.com Hao Zhou Economist, China + 9 Hao.Zhou@anz.com Louis Lam Analyst, Greater China + 7 Louis.Lam@anz.com CHART OF THE WEEK ANZ ACTIVITY INDEX The ANZ China Activity Index suggests that real activities have remained robust. As such, we expect China will post strong Q GDP growth figures on ober. 9 China - ANZ Activity Index 9 7 ANZ China Activity Index GDP, (RHS) 9 7

2 Greater China Economic Insight / / of 7 DATA PREVIEW GREATER CHINA ECONOMIC DATA CALENDAR With concerns of a slowdown in activities amid a weakening global outlook, the focus over the next seven days will be on China s HSBC Flash PMI; unemployment rates for Hong Kong (ANZ:.%) and Taiwan (ANZ:.%); Hong Kong s ust CPI reading (ANZ:.%); and Taiwan s industrial production numbers (ANZ:.%). A poor print for Taiwan's industrial production and job figures will reinforce our belief that the CBC will temporarily adopt a dovish stance. DATE COUNTRY DATA/EVENT PERIOD CONSENSUS LAST TIME (HK/SG) Taiwan Export Orders 7.%.% : Hong Kong Unemployment Rate SA.%.% : China Conference Board Leading Index : China HSBC Flash China PMI : Taiwan Unemployment Rate SA.%.% : Hong Kong Current Account Balance Q - - $7.B : Hong Kong Overall Balance of Payments Q - - $.9B : Hong Kong CPI.% 7.9% : China MNI Flash Business Sentiment Survey : Taiwan Commercial Sales.9%.% : Taiwan Industrial Production.%.9% : Taiwan Money Supply MB Daily Avg % : Taiwan Money Supply M Daily Avg - -.% : 7 China Industrial Profits YTD - -.% : 7 Taiwan Coincident Index (m/m) % : 7 Taiwan Leading Index (m/m) - -.% : 7 Hong Kong Exports % : 7 Hong Kong Imports - -.% : 7 Hong Kong Trade Balance (HKD) - - -$.9B :

3 Greater China Economic Insight / / of 7 MONTHLY CHARTBOOK, unless otherwise noted Forecasts Real GDP China Taiwan Hong Kong Consumer Price Index China......*.. Taiwan *.. Hong Kong Producer Price Index China * Unemployment Rate, % Taiwan Hong Kong Exports China * 7.. Taiwan *.. Hong Kong Imports China *.. Taiwan *.. Hong Kong Trade Balance China, USD bn * 7.. Taiwan, USD bn *.. Hong Kong, HKD bn PMI and Export Orders China Manufacturing PMI *..7 Taiwan Export Orders Industrial Production China......*..7 Taiwan Electricity Production China * Retail Sales China * Taiwan (Commercial Sales) Hong Kong M Growth China * Taiwan (M B) Hong Kong M Growth China * Taiwan Hong Kong Current Account, % of GDP China Taiwan Hong Kong Foreign Reserves, USD bn China 9,,,9,99,7 97* Taiwan 7 9 * Hong Kong 9 79* Government Fiscal Surplus/Deficit, % of GDP China Taiwan Hong Kong (FY ending in ch)

4 Greater China Economic Insight / / of 7 MONTHLY CHARTBOOK GREATER CHINA China s export and import growth were both healthy in ust, suggesting the economy is on track to achieve its growth target despite a global slowdown. Notably, imports accelerated, led by iron ore (+.% ), indicating that domestic demand has maintained a strong growth momentum. China s ust CPI stayed above the authorities target. As sequential growth remained upbeat, it is too early to say that inflationary pressures have eased. As such, it would be premature for the PBoC to loosen monetary policy. A slowdown in money supply has not resulted in lower inflation. According to the PBoC, a shift in term deposits from the banking to the non-banking sector has boosted the unrecorded money supply. This shift strengthens the case for the central bank to narrow negative real interest rates by gradually raising the policy rate. In contrast, Taiwan inflation remain subdued at.% in ust and was accompanied by worrisome trade figures that showed a sharp drop in export growth to 7.% from y s 7.% gain. As growth becomes an increasing concern, we think the CBC will temporarily adopt a dovish stance which will see the policy rate held at.7% in tember and TWD continue to weaken. Hong Kong s ust inflation reading is due next week and is expected to stay high at.%. Under the linked exchange rate regime, local prices closely follow international price movements, therefore we expect the government will pledge additional relief measures to the population segment most impacted by inflation China - Contributions to Inflation New Weights China - M and Credit Food Housing Medical Other CPI M, Credit, Taiwan - Trade Developments Hong Kong - CPI and CNY Trade Balance, $bn (RHS) Exports, Imports, CPI, HKD/C NY

5 Greater China Economic Insight / / of 7 CHINA REAL ACTIVITY: ACTIVITIES REMAINED ROBUST, A HARD LANDING NOW UNLIKELY Industrial production grew.% in ust, down from y s.% gain, and lower than market expectations. Retail sales gained 7.%,. ppt lower than the previous month. Fixed asset investment registered growth of.% in the first eight months of the year, down from the last reading of.%. Although activities were weaker than market expectations, the overall economy remains steady as all the activity indicators were within the normal range. China - Industrial Production China - Electricity Production (, mma) - - Overall Light Industry Heavy Industry Industrial value added Electricity production China - PMI China - PMI Breakdown 7 Official PMI HSBC PMI New Orders New Export Orders China - Retail Sales China - Housing and Auto Sales - - Nominal Real Auto Sales Housing Sales

6 Greater China Economic Insight / / of 7 CHINA EXTERNAL TRADE: IMPORTS SURPRISED ON THE UPSIDE Exports rose.% in ust, up from y s.%, and higher than the market expectation of.9%. Exports to the US and EU quickened to.% and.%, respectively. Imports surprised on the upside by a large margin, gaining.% in ust, higher than the previous month s.9% gain and the market consensus of.%. Imports of crude oil and iron ore rose significantly from the previous month, while soybean imports declined. As imports rose much faster than exports, the trade surplus narrowed to $7.7bn from y s $.bn China - Trade Developments Trade Balance, $bn (RHS) Exports, Imports, - - Soybean Crude Petroleum Oil China - Imports of Key Commodities (, mma) Iron Ore and Concentrates China - Exports by Destination (, mma) China - Imports by Origin (, mma) US EU NIE ASEAN US EU NIE ASEAN China - Trade Balance ($bn m rolling sum) China - Trade Balance ($bn m rolling sum) EU US Japan (RHS) ASEAN- AU+NZ NIE ex HK

7 Greater China Economic Insight / / 7 of 7 CHINA PRICES: INFLATION PRESSURES HAVE NOT EASED CPI inflation remains high at.% in ust, but down from.% previously, and was in line with market expectations. Inflation was driven by food and dwelling costs. On a m/m basis, CPI rose.% in ust, suggesting a strong momentum. As sequential growth remains upbeat, it is too early to say that inflationary pressures have eased. PPI rose 7.% in ust, higher than the market consensus of 7.%, and down from y s 7.% China - Inflation China - Contributions to Inflation New Weights CPI PPI Food Housing Medical Other CPI China - CPI Inflation China - PPI Inflation m/m (RHS) m/m (RHS) - - China - Real Interest Rate CPI, Deposit Rate Real Interest Rate 9 7 Sources: CEIC, ANZ Economic China - Inflation Expectation 7 Current Price Satisfaction Index Future Price Expectation Index

8 Greater China Economic Insight / / of 7 CHINA MONETARY POLICY: THE PBOC NOTES THE LEAKED EFFECT IN MONEY SUPPLY While new yuan loans exceeded market expectations, M growth trended down to.% in ust, the lowest rate seen in the past five years. However, slowing money supply has not led to lower inflation. The PBoC reports that a large quantity of term deposits have shifted from the banking to non-banking sector, increasing the unrecorded money supply in the economy. China - M and Credit, China - New Lending (RMB, bn),, - M, Credit, Medium and Long-term Short-term China - PBoC 7-day Repo Rate China - Spread between CHIBOR and LIBOR (monthly average) - 7 month month China - PBoC -year Lending Rate China - Reserve Requirement Ratio 7 Sources: Bloomberg, CEIC, PBoC, ANZ Economic

9 Greater China Economic Insight / / 9 of 7 CHINA EXCHANGE RATE: APPRECIATION OF THE RMB ACCELERATED IN AUGUST CNY strengthened by.9% versus USD in ust, compared with this year s average monthly pace of.%, and has raised the market s interest. We think that CNY is likely to outperform against non-usd currencies for the reminder of this year despite rising global financial market volatilities. We maintain our view that CNY will strengthen by % against USD in, leading to a year-end rate of.-.. China - RMB Spot Rate China - Exchange Rate Spot m NDF m NDF y NDF 9 China - Effective Exchange Rates (=) 9 7 China - Exchange Rate and Interest Rate. Forecast REER NEER USDC NY Spot PBoC -year Lending Rate (RHS),,,,,, China - FX Reserves (USD, bn), , China- Sterilisation (CNY, bn) CB Bills Issuance CB Bills Outstanding (RHS) Maturing C B Bills,,,,,, Sources: Bloomberg, CEIC, ANZ Research

10 Greater China Economic Insight / / of 7 CHINA COMMODITY PRICES: COMMODITY IMPORT PRICES DOWN FROM AN HISTORICAL HIGH China s commodity import prices declined in ust from the historical high recorded in y. However, we think global commodity prices are likely to pick up again if G monetary policies remain extremely loose. While major metal prices declined, steel prices remained stable, reflecting robust onshore fixed asset investment. ANZ Commodity Import Price Index (=) 7 ANZ Commodity Import Price Index (=) 7 Hard C ommodity Index Agricultural Goods Index China - Commodity Price Indices (=) China - Commodity Futures Prices (th RMB/ton) 7 7 Copper Coal Aluminium (RHS) Aluminium Zinc Copper (RHS) 9 7 China - Steel Product Prices (th RMB/ton) 7 Rebar Hot Rolled Sheet Steel Plate C old Rolled Sheet,,,7,,, China - Steel Futures (RMB/ton), Rebar Wire Rod Sources: Bloomberg, CEIC, ANZ Research

11 Greater China Economic Insight / / of 7 CHINA COMMODITY IMPORTS: STARTING TO PICK UP Most major commodity imports have started to pick up, as we expected. A recent pullback in global commodity prices has increased demand from Chinese producers. Notably, iron ore imports rose by % m/m to a five-month high in ust China - Copper Production and Imports (, mma) China - Aluminium Production and Imports (, mma) Production Imports (RHS) Production Imports China - Iron Ore Production and Imports (, mma) China - Coal Production and Imports (, mma) Production Imports (RHS) Production Imports (RHS) China - Energy Imports (, mma) China - Energy Production (, mma) Crude Oil LNG (RHS) Natural Gas Gasoline Sources: Bloomberg, CEIC, ANZ Research

12 Greater China Economic Insight / / of 7 CHINA WHITE GOODS/CAR PRODUCTION: UPWARD TREND CONTINUES Automobile production picked up in ust, gaining 9.%, versus a.% contraction in y. Conversely, production growth of household durables remained upbeat, reflecting strong underlying potential growth on the demand side. As the economy shifts to being more domestic-demand driven, production of white goods will be supported despite weakening demand from abroad. China - Automobile Production China - Refrigerator Production , mma, mma China - Air Conditioner Production China - Washing Machine Production , mma, mma China - TV Production China - Computer Production - - 7, mma, mma

13 Greater China Economic Insight / / of 7 CHINA STEEL INDUSTRY: IRON ORE PRICES ROBUST Production of steel products has remained high in the past months, and steel mills have continued to report decent profits. Iron ore inventory continued to build, and prices remained robust despite a fallback in global commodity prices. Due to high iron ore costs, steel mills will reportedly raise prices in tember. Steel inventories held by traders declined. China - Steel Products (mn tons) China - Large and Medium Steel Enterprises Profits (CNYbn) Domestic Production Net Exports (RHS) 7 China - Domestic Demand of Imported Ore (mn tons), China - Iron Ore Prices (RMB/ton), Average,, *Defined as monthly imports less monthly change of inventories Import Price Domestic Price China - Iron Ore Inventory (mn tons) 9 7 China - Steel Inventories Held By Traders (mn tons) Sources: Bloomberg, CEIC, ANZ Research

14 Greater China Economic Insight / / of 7 TAIWAN REAL ACTIVITIES: INDUSTRIAL PRODUCTION MODERATED Taiwan s commercial sales grew.% in y, compared with a.% gain in e. Retail and wholesale sales increased.7% and.%, respectively, compared with.% and.% in the previous month. However, industrial production moderated to.9% in y, reflecting downtime at the Formosa petrochemical plants. We expect production to rebound slightly to.9% in ust Taiwan - Real GDP Growth q/q, saar Taiwan - Contributions to GDP Growth (ppt) Private Consumption Investment Net Exports Government Consumption Change in Stocks (RHS) Taiwan - GDP by industry ( quarters to Q ) Manufacturing Taiwan - Commercial Sales % % Wholesale and Retail Trade Real Estate % % 7% 7% 9% 9% Public Administration and Defence Finance and Insurance Education Information & Communications Others Commercial Sales Wholesale Trade Retail Trade Taiwan - Industrial Production Index Index (RHS) Taiwan - Industrial Production of Top Four Sectors Electronic Parts Chemical Materials Basic Metal Computers & Electronics

15 Greater China Economic Insight / / of 7 TAIWAN EXTERNAL TRADE: EXPORTS DISAPPOINTED Exports slowed to 7.% in ust following a strong 7.% in y as global demand weakened. Exports to mainland China and Hong Kong moderated to.% from.%, respectively. Exports to the US slowed sharply to.% from.%, while exports to Europe remained weak at.%. Notably, shipments to Japan contracted 9.%, from a.% gain in y, reflecting the lingering impact of the Tohoku earthquake. Imports also slowed to.% in ust, from y s.%. Imports from the US, Japan and Europe contracted.%,.9% and.%, respectively. However, intra-regional imports were robust as imports from mainland China and Hong Kong combined rose.%, and imports from the ASEAN- rose.7%. Taiwan - Trade Developments Taiwan - Export Orders, ,,,,,,,, Trade Balance, $bn (RHS) Exports, Imports, Export Orders in USD Taiwan - Exports Comparison with South Korea Taiwan - Exports in TWD terms Taiwan South Korea - Difference - TWD-USD (RHS) Exports, TWD Exports, US$ Taiwan - Exports by Destination Asia ex Mainland & HK HK Mainland Europe US - - Taiwan - Imports by Origin Asia ex Mainland & HK HK Mainland Europe US

16 Greater China Economic Insight / / of 7 TAIWAN PRICES: INFLATION REMAINS BENIGN Headline CPI was unchanged at.% in ust as favourable weather helped to stabilise food prices. Meanwhile, on the wholesale level, WPI eased to.% ust, compared with a.% gain in y. Taiwan s strong currency against the USD continues to help contain imported inflation. The import price index in USD-terms rose 7.% in ust, while the index in TWD-terms only increased.%. Taiwan - CPI Taiwan - Contribution to CPI Inflation m/m saar Food Housing ex. Rental Education & Entertainment CPI, Rental Transportation Other Taiwan - Headline and Core CPI Taiwan - Money Supply and Inflation CPI CPI ex Food & Energy CPI ex Fruits, Vegetables, Fish, Shellfish & Energy - CPI excl. fruits, vegetables, fish, shellfish & energy M Growth Taiwan - WPI Taiwan - Import Price Index m/m saar ImPI in TWD ImPI in USD

17 Greater China Economic Insight / / 7 of 7 TAIWAN MONETARY AND RATE POLICIES: TIGHTENING SET TO PAUSE ON WEAKER GLOBAL OUTLOOK On the back of a weaker global economic outlook and low inflation, the central bank may opt to pause its monetary tightening stance by keeping the interest rate on hold at.7% at its 9 tember meeting. Taiwan - Money Supply Taiwan - Interest Rate Mb M 7 7 Rediscount Rate y Gov't Bond Yield m TAIBOR -Leading Banks Base Rate Taiwan - TWD Exchange Rates BIS NEER BIS REER TWD/USD Spot (RHS, inverted) Taiwan - USDTWD vs USDKRW (One year rolling index) TWDUSD KRWUSD Taiwan - Loans and Deposits Taiwan - Real Estate Loans Deposits, Loans, Loan-Deposit Ratio % (RHS) - - Real Estate Loan, TWD bn RE Loan as % of Banks' Loan Book (RHS)

18 Greater China Economic Insight / / of 7 TAIWAN LABOUR MARKET: THE UNEMPLOYMENT RATE REMAINED FLAT The jobless rate remained low at.7% sa in y, compared with.% in e. We expect unemployment will have remained flat at.% in ust.... Taiwan - Unemployment Rate Taiwan - Unemployment by Sector (y, person thousand, share of total) Manufacturing....., %, 9%, %, %, % 7, % Construction Wholesale & Retail Trade Accomodations & Food Services Education Other Unemployment rate, sa Unemployment rate, mma Taiwan - GDP vs Disposable Income (99=) GDP per Capita Household Consumption Household Disposable Income Taiwan - Employment by Sector (, person thousand, share of total),, %,97, %, % 7, %,77, % 7, 7% Manufacturing Construction Wholesale & Retail Trade Accommodation & Food Services Education Other

19 Greater China Economic Insight / / 9 of 7 TAIWAN FINANCE AND PROPERTY: TAIEX INDEX DROPPED AMID GLOBAL MARKET VOLATILITY The luxury tax on real estate is now in place. Although property prices in Taipei city rose by.% in y, the number of transactions dropped from 9 in e to in y. The TAIEX index dropped to below 7, in tember. Also in tember, we saw major net foreign equity outflow amid the volatile market., Taiwan - Equity ket Taiwan - Bond ket Net Issuance (TWD bn) 9,, 7,,, -, - TAIEX Weighted Index P/E Ratio (RHS) Government Bond Corporate Bond Taiwan - Property Price Index, Taiwan - Property Transaction and Stock ket Index,,,,,,,,, - -,, - Taipei City Taipei County GDP (RHS) No. of Building Ownership Transfer (Taipei) TAIEX Weighted Index (RHS) Taiwan - Housing Affordability Ratios. 7 Housing Price to Income Ratio (times) Housing Loan Payment to Income Ratio, % (RHS) Taiwan - Lending Rate and Property Price Property Price Index - Taipei Nominal Lending Rate, % (RHS) CPI Rental, mma % (RHS)

20 Greater China Economic Insight / / of 7 TAIWAN CROSS-STRAIT ECONOMIC ACTIVITY: TRADE WITH MAINLAND SLOWED IN AUGUST Exports to mainland China rose by 7.% and imports rose by.% in ust, down from the previous month s.% and 9.%, respectively. The trade surplus with the Mainland narrowed to $.bn from $.7bn. Exports to Hong Kong also grew 9.% in ust. Taiwan - Trades with Mainland China Taiwan - Trades with Hong Kong Trade Balance, $bn (RHS) Exports, Imports, Trade Balance, $bn (RHS) Exports, Imports, Taiwan - Visitor arrivals from Mainland China, Taiwan - Outbound Investment in the Mainland (US$ mn),,,, Share of all visitors, % (RHS) Persons, th MOEA's Approved Amount

21 Greater China Economic Insight / / of 7 HONG KONG REAL ACTIVITY: INDICATORS POSED A MIXED PICTURE IN JULY Retail sales grew 9.% in y,.ppt above e s results, driven by strong tourist inflow and a low unemployment rate. Sales volume increased.%, from.%, previously. Construction activity growth slowed to % in Q, compared with 9.% in Q. Private construction sites contracted.% in Q, in stark contrast with the.% gain in Q. Container throughputs by sea edged up to.% in ust, compared with.% in y. Meanwhile, air cargo volumes prolonged its weakness and declined by 7.%. Hong Kong - GDP Hong Kong - Contributions to GDP Growth (ppt) q/q, saar - - Private Consumption Investment Net Exports - - Government Consumption Changes in Inventories Total, Hong Kong - Retail Sales Hong Kong - Retail Sales Components Value Volume - Clothing & Footwear Jewellery, Watches & Clocks Motor Vehicles Hong Kong - Construction Output Value 7 Total Public Sector Sites Private Sector Sites Non-construction Sites - - Hong Kong - Logistics Activities Container Throughput (Sea) Airport Cargo Movement Passenger Movement (Air)

22 Greater China Economic Insight / / of 7 HONG KONG EXTERNAL SECTOR: EXTERNAL DEMAND FROM THE US CONTRACTED y exports grew 9.%, roughly unchanged from the previous month as global uncertainties continued to weigh on external demand. Imports increased.% in y, down from.% in e. The total trade balance narrowed to HK$.9bn. Exports to China grew.% in y, from.% in e. Exports to the US contracted.7% but exports to the EU rose by.% compared with e s gain of 7.% Hong Kong - Trade Developments Hong Kong - Exports by Destination Trade Balance, HKD bn Exports, Imports, US EU NIE ASEAN China Hong Kong - Regional Contributions to Export Growth (ppt) Hong Kong - Regional Contributions to Import Growth (ppt) - ASEAN EU US China Japan NIEs Other Total, - ASEAN EU US China Japan NIEs Other Total, Hong Kong - Exports by Destination ( months to y ) Hong Kong - Imports by Origin ( months to y ) HK$ bn, % HK$ bn, % HK$ bn, % HK$9 bn, % HK$97 bn, % HK$,997 bn, % China US EU Japan ASEAN Other HK$9 bn, % HK$7 bn, % HK$7 bn, 9% HK$797 bn, 9% HK$ bn, % HK$,9 bn, % China ASEAN Japan EU US Other

23 Greater China Economic Insight / / of 7 HONG KONG PRICES: INFLATIONARY PRESSURES CONTINUE TO RISE Headline CPI surged 7.9% in y, mainly due to a low base resulting from rental subsidies. However, stripping out the effect of the government s relief measures, CPI still rose.% in y,.ppt higher than e s reading, driven by higher food and rental costs. Headline CPI will start to moderate as the impact of housing subsidies will have started to kick-in. However, underlying inflation will remain elevated on accommodative US monetary policy and higher local wages. - - Headline, Headline, m/m saar Hong Kong - Inflation Excl. Gov't Relief, Hong Kong - Contribution to Inflation Food Electricity, Gas & Water Misc services Housing Transport Others Food Transport Hong Kong - Inflation Housing Elect., Gas & Water (RHS) - - Hong Kong - CPI and CNY CPI, HKD/C NY Hong Kong - CPI and Liquidity Hong Kong - CPI and Unemployment Rate m HIBOR CPI, (RHS) CPI, Unemployment Rate, sa (RHS)

24 Greater China Economic Insight / / of 7 HONG KONG MONEY, BANKING AND THE EXCHANGE RATE: STRONG DEMAND FROM OVERSEAS BORROWERS Deposits in Hong Kong rose.% m/m in y, after shrinking.9% in e. Hong Kong-dollar deposits rose.%, while foreign currency deposits grew.9%. RMB deposits increased.% to CNY7.bn in y. RMB trade settlement volumes shrank by a quarter to CNY9.bn from CNY.9bn. Bank loans grew by.% m/m or 7.% in y. Loans for use outside of Hong Kong (+.7%, m/m) continued to grow faster than loans for use in Hong Kong (.9%). Claims by Hong Kong s banks on Mainland entities continued to expand to HK$.trn in e. Hong Kong - Money Supply Hong Kong - Interest Rate Spread (USD LIBOR - HKD HIBOR, basis point) - - M, M, m/m -month -month 7 Hong Kong - RMB Deposits Deposit, RMBbn Trade settlement amount, RMBbn RMB as % of Total Deposits (RHS) Hong Kong - HKD Loans made by Authorised Institutions Loan-to-deposit Ratio Loans, (RHS) - Hong Kong - FX Reserves (USD bn), Hong Kong - Banks' Claims on Customers in Mainland China,,, Non-HKD Claims, HKDbn HKD Claims, bn % of All External C laims (RHS)

25 Greater China Economic Insight / / of 7 HONG KONG PROPERTY MARKET: TRANSACTIONS DECLINED SHARPLY IN JULY ON ELEVATED PRICES Transaction volumes fell sharply to HK$9.bn in y from HK$9.bn in e, reflecting the impact of government measures to curb property prices. However, the Centa City Leading Index inched up to 99. in ust, from 99. in y, an indicator that property prices will remain elevated. Going forward, a strong RMB and a negative real interest rate will continue to support property prices. As such, a massive property selloff is unlikely. Hong Kong - Centa City Leading Index Hong Kong - Property Sales Transactions Volume, thousand units (RHS) Value, HKD bn Hong Kong - Mortgage Interest to Rental Ratio Hong Kong - Housing ket Below means the interest expense for a sq m flat with % down is cheaper than renting the same flat. 7 Hong Kong Kowloon New Territories Property Price Index (999=) Centaline Affordability Ratio, All Households (RHS)

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