System loans increase 2.7% m/m in June: HKMA

Trade finance also rebounded.

The HKMA’s June monetary statistics showed system loans rose 2.7% m/m.

According to a research note from Barclays, meanwhile, trade finance rebounded by +5% m/m.

On the other hand, system deposits were largely flat as growth in RMB deposits offset the decline in US$ deposits.

Here's more from Barclays:

Strong loan growth: System loans rose 2.7% m/m and growth was broad-based. Loans for use in HK rose by 2.5%, loans for outside HK rose by 2.6% and trade finance rebounded by 5% m/m. We believe this was partially as a result of renewed confidence over China’s economy during the market rally in June.

System deposit stable: System deposits in June was largely flat (-0.1% m/m) as a decline in USD deposits (-1.6% m/m) was offset by growth in RMB deposits (+2.1% m/m amounting to Rmb923bn, 11.8% of system deposits).

HK$ deposits rose by 0.1% m/m. There was a negative deposit mix shift in June as demand and savings deposits declined by 0.6%m/m and 1.6% m/m respectively, while time deposits grew by 1.4% m/m. The system loan to deposit ratio rose to 72.7% (from 70.7% in May).

Cheaper funding cost: Composite interest rate, which is a measure of the system funding costs declined by 2bp m/m to 29bp due to lower CNH deposit funding cost and easier liquidity conditions, in our view.

Mortgage drawdown slows: The June mortgage survey showed that mortgage loans approved in June 2015 grew by 12% m/m to HK$29.9bn due to sharp increase in secondary market financing (+18.6% m/m) and refinancing (+16.4% m/m). New mortgage loans drawn down grew by 4.1% m/m to HK$19.3bn.

Outstanding mortgages increased 0.5% m/m as new mortgage loans booked offset principal repayments. Hibor-based mortgage accounted for 85.8% (May: 85.2%) of new mortgage approved. The average system mortgage rate was stable at 2.26% based on our calculations.